The Federal Reserve issued a detailed and scathing assessment on Friday of its failure to identify problems and push for fixes at Silicon Valley Bank before the U.S. lender's collapse, and promised tougher supervision and stricter rules for banks.
In what Fed Vice Chair for Supervision Michael Barr called an "unflinching" review of the U.S. central bank's supervision of SVB, the Fed said its oversight of the Santa Clara, California-based bank proved inadequate and that regulatory standards were too low.
At the time of its failure, SVB had 31 unaddressed citations on its safety and soundness, triple what its peers in the banking sector had, the report said. Regulators shut SVB on March 10 after customers withdrew $42 billion on the previous day and queued requests for another $100 billion the following morning.
The realization that smaller banks are capable not only of causing ructions in the broader financial system but of doing it at such speed has forced a rethink. Between 2016 and 2022, as assets in the banking sector grew 37%, the Fed's supervision headcount declined by 3%, according to the report.
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