Friday, April 12, 2024

Svb, the six (not heeded) warnings of the Federal Reserve before bankruptcy –

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Silicon Valley bank was a problem, which the Fed had known for at least two years. The first warnings date back to 2021, the year the San Francisco Federal Reserve Bank, which oversaw the start-up tech bank that went bankrupt on March 10, issued six warnings, categorized as “Matters Requiring Attention” and “Matters Requiring Attention.” interest “.” Immediate attention.” Of those warnings, such as The New York TimesThe Fed’s fear, which appears to be proven correct, is that the institution may have difficulty ensuring sufficient liquidity for clients in the event of problems. According to Bloomberg, the US authorities were unable to find a suitable buyer to acquire more than 100% of the bankrupt bank. For this reason, the FDIC, the Federal Deposit Insurance Agency, is said to be evaluating the possibility of splitting the bank into at least two parts and proceeding with their sale.

Fed lens in 2022

The alarm bells went unheeded. Which is why in July of 2022 Silicon Valley Bank underwent a comprehensive supervisory review, with further scrutiny, and was ultimately rated deficient in governance and controls. Eventually, the Fed placed a series of restrictions on the bank, preventing it from making further acquisitions. Moreover, in the fall of 2022, there was a meeting between San Francisco Fed supervisors and bank executives to “discuss their ability to access liquidity in the event of a crisis and the potential for exposure to losses in the event of an increase in interest rates,” he asserts. The New York Times. The US central bank realized that the company was using faulty models to determine its reaction if the central bank raised interest rates. SVB executives speculated that the increase in interest income generated by raising interest rates would help them improve their financial condition. But this turned out to be an illusion.

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Horizontal Review, beginning of 2023

In early 2023, the Fed will begin the so-called Horizontal review From Svb Policies, an assessment intended to measure the strength of risk management. This revealed more shortcomings. But by then it was already too late. The Fed has launched an investigation into what went wrong with oversight, which is expected to be published by May 1. But the fact that most of the issues have been known for some time raises the question of whether supervisors could or should have done more to force the organization to address its vulnerabilities. What is certain is that oversight was lacking, it remains to be understood, as mentioned by Al The New York Times Peter Conti-Brown, expert on financial regulation “Be it the failure of supervisors.”

Ike Walton
Ike Walton
"Infuriatingly humble analyst. Bacon maven. Proud food specialist. Certified reader. Avid writer. Zombie advocate. Incurable problem solver."
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