SVB Review Finds Fed Staff Failed to Act on Bank's Vulnerabilities

A review of the Silicon Valley Bank collapse found that Federal Reserve supervisory staff 'knew or should have known' about the bank's vulnerabilities as early as March 2022.

The report, conducted by the Starling Advisory Group at the request of Fed Vice Chair for Supervision Michelle Bowman, identified a 'confluence of vulnerabilities' that contributed to the bank's failure.

The review found that Silicon Valley Bank faced unrealized losses due to the Federal Reserve's interest rate hikes in 2022 and 2023, and its reliance on uninsured deposits from venture capital-backed tech firms left it at risk of a run.

The report also noted a 'long-standing culture of risk aversion' among Fed staff, who believed it was safer to take no action unless they were certain the action was exactly right.