Fed Supervisors Faulted for Delay in Silicon Valley Bank Action
The Federal Reserve's review of Silicon Valley Bank's collapse has revealed that supervisors identified vulnerabilities at the bank but failed to act quickly enough. The review found that SVB had 31 open supervisory findings, three times the average for banks of comparable size. Supervisors flagged interest rate risk deficiencies in CAMELS examinations during the 2020, 2021, and 2022 review cycles, yet formal supervisory action didn't arrive until November 2022.
The bank's total assets surged from approximately $71 billion in 2019 to over $211 billion by 2021, a nearly threefold increase in just two years. On March 9, 2023, depositors withdrew more than $40 billion from the bank in a single day, triggered by a failed capital raising effort that spooked an already nervous client base.
The review explicitly cited the post-2018 regulatory framework as a contributing factor. The Fed adopted what the review characterized as a less aggressive supervisory posture under this framework. Examiners were slower to escalate concerns and less inclined to use enforcement tools.