Investigation initiated by Fed announced

The Silicon Valley Bank debacle is putting pressure on the US Federal Reserve. She wants to clarify whether the supervision of the institute was sufficient.

Collapse there Silicon Valley Bank

(Bloomberg) — The Federal Reserve is launching an internal probe into its regulator of Silicon Valley Bank after its collapse sparked harsh criticism of central bank control.

Fed Vice Chairman Michael Barr, in charge of banking supervision, will lead the investigation, the results of which are due to be released by May 1st, the Fed announced on Monday. The collapse of the bank, overseen by the Federal Reserve Bank of San Francisco, was the largest bank failure in more than a decade.

„The events surrounding Silicon Valley Bank require a thorough, transparent, and timely investigation by the Federal Reserve‘ said Fed Chair Jerome Powell in a statement.

After regulators were forced to take emergency measures to stem the lurching of small lenders on Sunday night, questions quickly surfaced as to who was to blame for the SVB’s collapse. According to informed circles, the Biden administration is also investigating the quality of controls carried out by the California authorities and the San Francisco Fed.

In particular, it is also about whether SVB and New York’s Signature Bank, which closed on Sunday, did the necessary planning and stress testing when the Fed raised interest rates last yearsaid one of the people. Signature had approximately $88.6 billion in deposits as of December 31.

According to Senator Bill Hagerty, a Tennessee Republican, it’s a “serious question” whether regulators missed something in the run-up to the SVB’s rapid collapse.

Bank was poorly managed

„Silicon Valley Bank was clearly mismanaged‘ he said on Monday. SVB chief executive Greg Becker was a member of the San Francisco Fed’s board of directors until Friday, the day the bank collapsed and was taken over by the deposit insurance company. The nine-member body is a kind of supervisory board that is also supposed to maintain contact between the central bank and the private banking sector.

Former Fed Governor Daniel Tarullo said a key question is whether “the gap in oversight” is due to mistakes made by the regulators responsible for the SVB, or whether it results from the Fed’s guidance in Washingtonhow such oversight should be carried out.

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