The US Federal Reserve Admits To Oversight Failings At Silicon Valley Banks

According to the widely anticipated report published Friday by the Federal Reserve regarding Silicon Valley Bank's (SVB) collapse last month, despite admitting to its own failures, the US Federal Reserve has called for more oversight of the financial sector.

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According to Federal Reserve vice chair for Supervision Michael Barr, the Federal Reserve must strengthen its oversight and regulation following Silicon Valley Bank's failure.

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The federal regulators failed to take forceful enough action after identifying problems at California's high-tech lender after SVB's management failed to adequately manage risk.

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As a result of SVB's failure on March 10, another regional US bank failed, and Credit Suisse pushed another regional US bank into a merger under pressure from Credit Suisse.

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In the wake of SVB's collapse, both European and American regulators made concerted efforts to reduce banking turmoil and market volatility.

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While SVB's assets more than doubled in size between 2019-2021 during a high-tech boom, the Fed did not recognize the severity of its governance, liquidity, and interest rate risk management deficiencies.

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To address this issue, Barr said the Fed would be looking at strengthening bank supervision so that it would be able to identify risks and vulnerabilities in financial institutions more quickly.

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Furthermore, the Fed is also considering strengthening the regulatory framework for banks and tightening the rules regarding interest rate risk, liquidity requirements, and stress testing, as well as tightening the rules for interest rate risk.

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As a senior Fed official told reporters prior to the publication of the report, the review will be comprehensive and it will look at the Fed's liquidity and capital rules in a broader sense.

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In a statement released by the Federal Reserve, Jerome Powell declared that he welcomed the "self-critical" report Barr issued regarding the collapse of SVB.

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It is my firm belief that his recommendations to improve our rules and supervisory practices will strengthen and enhance the overall banking system and will result in a stronger and more resilient financial system as a result," he said.

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