US Fed says it failed to take forceful action on Silicon Valley Bank
Washington: The US Federal Reserve said it failed to act with “sufficient force and promptness” in its oversight of Silicon Valley Bank (SVB), which collapsed last month in the country’s biggest bank failure since 2008. The media told The finding is one of the main findings of the Federal Reserve’s investigation into the episode, the BBC reports. This gave rise to global fears about the state of the banking industry.
The review comes as another US lender, First Republic, remains in trouble. US regulators are reported to be working on a possible rescue of the struggling firm, which was the 14th largest bank in the US at the end of last year.
The Federal Reserve’s vice chair for supervision, Michael Barr, who led the review, said the US central bank should tighten its rules in response to what it learned from SVB’s demise, the BBC reported.
“Federal Reserve supervisors failed to take adequate action,” he said, pointing to regulatory standards that were “too low”, supervision that did not act with the urgency it required, and a wider exposure to troubles at a mid-sized bank. Risks to the System Fed Policies Missed
“After the failure of the SVB, we must strengthen the supervision and regulation of the Federal Reserve,” he said. The chairman of the Federal Reserve, Jerome Powell, said he welcomed the “thorough and self-critical report”.
“I agree with and support their recommendations to address our regulatory and supervisory practices, and I am confident that they will lead to a stronger and more resilient banking system.
The Fed’s report was one of three published by US officials on Friday detailing regulatory lapses that contributed to the failures of SVB and Signature Bank last month. Both banks cater to business customers and ran into trouble after the US central bank sharply raised interest rates last year when customers began withdrawing money.
SVB’s subsequent announcement that it needed to raise funds last month sparked panic and billions of dollars were withdrawn overnight, prompting regulators to step in, the BBC reported.
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