The Federal Reserve has released a report on the supervision and regulation of Silicon Valley Bank (SVB), highlighting the need to strengthen its framework in light of the bank's failure. The review found that SVB's management and board of directors failed to manage their risks, and the Federal Reserve's supervisors did not fully appreciate the extent of the bank's vulnerabilities.
The report emphasizes four key takeaways: SVB's failure to manage risks, supervisors not appreciating the extent of vulnerabilities, insufficient steps to ensure problems were fixed quickly, and the impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) on effective supervision. Vice Chair of Supervision, Michael S. Barr, called for improvements in the speed, force, and agility of supervision and a strengthening of the regulatory framework.
Barr stated, "As risks in the financial system continue to evolve, we need to continuously evaluate our supervisory and regulatory framework and be humble about our ability to assess and identify new and emerging risks." The report suggests revisiting the tailoring framework and evaluating a range of rules for banks with $100 billion or more in assets. It also mentions the need to improve supervision and regulation of interest rate risk, liquidity risk, and capital requirements, as well as the oversight of incentive compensation programs.
The report serves as a self-assessment for the Federal Reserve and is expected to contribute to strengthening supervision and regulation, with the aim of ensuring that the banking system remains strong and resilient.