Silicon Valley Bank collapse: Fed became aware of interest rate, liquidity risks in Nov. 2021 | FULL

The U.S. Senate Banking Committee held its first of several hearings on the collapse of Silicon Valley Bank (SVB) and Signature Bank on Tuesday, and the federal regulatory response.

During testimony, SVB's interest rate and liquidity risks were identified as the major reasons behind the collapse.

Federal Reserve Vice-Chair for Supervision Michael S. Barr testified that the regulator’s "supervisors began highlighting these deficiencies at the firm on interest rate risk management and liquidity risk management in a serious way in November of 2021 as far as I know — so a little more than a year prior to that (Barr first learning of deficiencies in February 2023)."

"They intensified that supervisory review as part of its full-scope exam in the summer of 2022 when the firm was downgraded for deficiencies in its risk management practices. And they brought those risk management issues, according to the record, to the CFO of the firm in October and issued additional findings in November of 2022," Barr said.

"I first learned of the issues at Silicon Valley Bank with respect to interest rate risk in mid-February of 2023," Barr added.

Barr said in his written testimony that the California-based bank's failure “is a textbook case of mismanagement.” He points to SVB's “concentrated business model,” in which its customers were overwhelmingly venture capital and high-tech firms in Silicon Valley. Barr contends the bank failed to manage the risks of its bond holdings.

For more info, please go to https://globalnews.ca/news/9580691/silicon-valley-bank-collapse-first-citizens-takeover/

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