Just over a year before
As the upgraded crew took over, it fired off a series of formal warnings to the bank’s leaders, pressing them to fix serious weaknesses in operations and technology, according to people with knowledge of the matter.
Then late last year they flagged a critical problem: The bank needed to improve how it tracked interest-rate risks, one of the people said, an issue at the heart of its abrupt downfall this month.
The Federal Reserve has promised to investigate how it supervised
In a twist, the San Francisco Fed’s deputy point person in charge of monitoring the bank until late 2021 received a new assignment afterward, becoming the regulator’s point person on
A representative for the Fed declined to comment. The people who described the regulator’s supervision asked not to be identified because the process is confidential.
SVB was a fraction of its recent size when the Trump administration and congressional Republicans led a bipartisan effort to roll back banking regulations in 2018, ending automatic annual stress testing for banks smaller than $250 billion in assets. The lender’s chief executive officer,
That trajectory made SVB the fastest-growing major bank in the nation over the past five years — even outpacing firms such as First Citizens BancShares Inc. and Truist Financial Corp. that completed mergers. By this year, SVB was the country’s 16th largest by assets.
Becker also had another role: He had been a part of the nine-member San Francisco Fed board from 2019
Its collapse late last week left legions of startups facing the prospect that they wouldn’t be able to pay employees or keep the lights on, prompting the Fed and Federal Deposit Insurance Corp. to take extraordinary steps, including rescuing uninsured depositors and offering the industry a borrowing facility to avoid similar strains.
The central bank vowed to publish the results of its internal review by May 1. “The events surrounding Silicon Valley Bank demand a thorough, transparent and swift review by the Federal Reserve,” Fed Chair Jerome Powell said in a statement this week.
Already, the bank’s lack of a chief risk officer for much of last year has emerged as a focal point, Bloomberg News reported Tuesday.
The San Francisco Fed has a program for overseeing community and regional institutions, as well as a group trained to monitor big banks. As that one prepared to formally watch Silicon Valley Bank at the start of last year, examiners began sending the firm two types of warnings: matters requiring attention, or MRAs, and matters requiring immediate attention, or MRIAs.
While not disclosed to the public, MRAs and MRIAs are supposed to seize executives’ attention, requiring they fix problems to avoid more severe sanctions, known as consent orders. Those more stringent directives, once public, can send stocks tumbling by forcing banks to make costly improvements, pull back from certain activities or, in the extreme, stop growing.
The Biden administration found out about the full extent of SVB’s stack of MRAs and MRIAs on March 10, the day the firm was seized by regulators, according to people familiar with the matter.
SVB and Silvergate succumbed to the same basic pressures. Silicon Valley Bank’s clientele of tech startups drew down their balances as the industry struggled to raise fresh funding, while Silvergate’s crypto-friendly customers withdrew to weather last year’s plunge in digital-asset prices.
Banks are supposed to structure their balance sheets conservatively to handle unexpected economic shocks and deposit flight. But Silicon Valley Bank and Silvergate both invested heavily in bonds with low interest rates, which slumped in value as the Fed raised rates over the past year. When withdrawals forced the lenders to sell those assets, they incurred severe losses.
The Justice Department and the Securities and Exchange Commission are
(Updates with context on banks’ growth rates in eighth paragraph and chart.)
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