The nation’s top financial regulator is asserting that Silicon Valley Bank’s own management was largely to blame for the bank’s failure earlier this month.
Federal Reserve Board Vice Chair for Supervision Michael Barr listens to participants at a hearing at the Federal Reserve building, Sept. 23, 2022, in Washington.
Silicon Valley Bank, based in Santa Clara, California, was seized by the Federal Deposit Insurance Corp. on March 10 in the second-largest bank failure in U.S. history. Late Sunday, the FDIC said that First Citizens Bank, based in Raleigh, North Carolina, had agreed to buy about one third of Silicon Valley’s assets — about $72 billion — at a discount of about $16.5 billion.
Members of Congress will surely use the hearings to stake out their positions on issues raised by the bank failures. These issues include whether the $250,000 limit on federal deposit insurance should be raised, a change that would require Congress’ approval. The 2018 law exempted banks with assets between $100 billion to $250 billion — Silicon Valley’s size — from requirements that it maintain sufficient cash, or liquidity, to cover 30 days of withdrawals. It also meant that banks of that size were subject less often to so-called “stress tests,” which sought to evaluate how they would fare in a sharp recession or a financial meltdown.
“You’re never going to write liquidity regulations that are strict enough to prevent that, when there’s a run on a fundamentally unviable bank,” Kelly said.
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