Federal Reserve Staff Faulted for Failure to Prevent Silicon Valley Bank Collapse

A preliminary report by Starling Advisory Group has faulted Federal Reserve staff for their failure to act on mounting trouble at Silicon Valley Bank, leading to its collapse in 2023.

The report found that Fed staffers knew or should have known about the bank's vulnerabilities as early as March 2022 but failed to take prompt and decisive action to prevent the collapse.

Bowman, the top banking regulator at the Fed, said that a 'confluence of vulnerabilities' contributed to SVB's failure, including mounting losses on securities, a deposit base prone to bank runs, and a lack of readiness to borrow from a critical Fed program.

Bowman also pointed out that a 'long-standing culture of risk aversion' among Fed staffers led them to take no action unless they were certain the action was exactly right.