Fed Blames Risk Aversion Culture for Silicon Valley Bank Collapse

Michelle Bowman, Vice Chair of the Federal Reserve, revealed that an independent review attributed the collapse of Silicon Valley Bank (SVB) to a culture of risk aversion within the central bank's supervisory staff. The Starling Advisory Group's report found that SVB's vulnerabilities were identified as early as March 2022, but intervention was delayed due to internal barriers.

The review highlighted severe flaws in the oversight mechanisms, including unrealized accounting losses and a 94% uninsured deposit base. Examination staff believed taking no action was safer than risking an incorrect supervisory decision, perpetuating the culture of risk aversion.

Bowman emphasized that this mindset led to the supervisory failures, debunking claims that social media triggered the bank run. In fact, only 4% of online chatter occurred before the bank's failure became inevitable.