Fed Staff Knew or Should Have Known About Silicon Valley Bank Vulnerabilities

A review of the Federal Reserve's oversight of Silicon Valley Bank has found that its staff 'knew, or should have known' about the bank's vulnerabilities prior to its failure in March 2023. Fed Vice Chair for Supervision Michelle Bowman announced the initial results of the review by consulting firm Starling Advisory Group in a speech in London.

The report found that Silicon Valley Bank had large holdings of US Treasuries that lost value after the Fed raised interest rates, and its deposits were mostly uninsured and concentrated among tech startups and venture capital firms. The bank's failure led to a joint statement by the heads of the Fed, FDIC, and Treasury Department to insure all deposits in the bank, even those above the $250,000 limit.

The review disagreed with a previous report by then-Vice Chair for Supervision Michael Barr that found the Fed's staff were overcautious in responding to the episode. Bowman has begun a sweeping overhaul of the Fed's bank-oversight practices and plans to reduce the ranks of its supervision and regulation division by about 30%.