A Federal Reserve Board press release on April 28 announced the results from the Fed’s review of the supervision and regulation of Silicon Valley Bank.  The review finds four key takeaways on the causes of the bank’s failure:

  1. Silicon Valley Bank’s board of directors and management failed to manage their risks;
  2. Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity;
  3. When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough; and
  4. The Board’s tailoring approach in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act and a shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.

“Following Silicon Valley Bank’s failure, we must strengthen the Federal Reserve’s supervision and regulation based on what we have learned,” said Vice Chair for Supervision Barr. “This review represents a first step in that process—a self-assessment that takes an unflinching look at the conditions that led to the bank’s failure, including the role of Federal Reserve supervision and regulation.”

Silicon Valley Bank had 31 unaddressed supervisory warnings at the time of its collapse.  The Fed has been subject to criticism for its failure to act on the problems it uncovered and on May 16 announced that it will soon unveil a plan to ensure that supervisors police the banks more aggressively.

In light of the recent bank failures and the response of regulators, Doran Jones has created a Risk and Compliance service offering.

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