Fed Vice Chair Calls Silicon Valley Bank a ‘Textbook Case of Mismanagement’

“SVB’s failure is a textbook case of mismanagement,” he said, while adding that the “failure demands a thorough review of what happened, including the Federal Reserve’s oversight of the bank.”

He noted that Fed supervisors spotted a range of problems in late 2021 and throughout 2022, even rating the bank’s management as deficient, which barred it from growing by acquiring other companies. And he said that supervisors told board officials in mid-February that they were actively engaged with SVB on its interest rate risk.

“As it turned out, the full extent of the bank’s vulnerability was not apparent until the unexpected bank run on March 9,” Mr. Barr added. “In our review, we are focusing on whether the Federal Reserve’s supervision was appropriate for the rapid growth and vulnerabilities of the bank.”

Yet Mr. Barr was also likely to face questions — especially from Democrats — about whether changes to Fed regulation and supervision in recent years could have paved the way for the implosion. Congress passed a law that made midsize bank oversight less onerous in 2018, and Mr. Barr’s predecessor, Randal K. Quarles, an appointee of President Donald J. Trump, had carried out and in some cases built upon those changes in 2019.

Mr. Barr, a Biden appointee, started in his role in mid-2022. He has been carrying out what the Fed calls a “holistic review” of bank capital standards, but that has yet to be completed.

Article source: https://www.nytimes.com/2023/03/27/business/economy/fed-silicon-valley-bank-mismanagement.html