«Crac Svb, the Federal Reserve has failed in supervision. Now more checks»- Corriere.it

The Federal Reserve makes self-criticism on the failure of Silicon Valley Bank (SVB). On the one hand, “the board and management of the SVB have failed to manage the risks”. On the other Federal Reserve supervisors did not fully understand the extent of the vulnerabilities as the SVB grew in size and complexity». And «when the supervisory authorities have identified the vulnerabilities, they have not taken sufficient measures to ensure that Silicon Valley Bank resolved the problems quickly enough. Finally, the SVB board created a “tailored approach” in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act, which coupled with the change in supervisory policy orientation impeded effective supervision, «reducing standards, increasing complexity and promoting a less assertive supervisory approach». This is what we read in the long report published on Friday 28 April by the Fed on the results of the supervision entrusted to the vice president for supervision, Michael Barr. Which is now calling for change, addressing regulatory weaknesses and tightening controls.

“After the failure of Silicon Valley Bank, we need to strengthen the supervision and regulation of the Federal Reserve based on what we have learned,” said Barr. And this review represents “a first step” in that process: a self-assessment that examines in depth the conditions that led to the bank’s failure, including the role of the Federal Reserve’s supervision and regulation. The report examines in detail the bank’s management and supervisory and regulatory issues related to the crash, tracing the recent history of the SVB’s supervision, with the examination of more than two dozen documents containing confidential supervisory information of the bank, including letters, Fed review results and warnings.

Fed Chairman Jerome Powell welcomed the rainsightful and self-critical report on Federal Reserve supervision: «I agree with and support the recommendations to improve our regulations and supervisory practices, and I am confident that will lead to a stronger and more resilient banking system.” Powell said.

But the contagion caused by the failure of Silicon Valley Bank, followed by the closure of Signature Bank of New York and then the bailout of Credit Suisse, has not ended. First Republic Bank, in California, remains in the eye of the storm, after admitting the flight of $100 billion in deposits in the past month. The stock continues to plunge on the stock exchange, burning over 21 billion in capitalization this year: from 147 dollars in early February the shares fell to less than 4 dollars on Friday, with a 70% drop in the last week. The situation is dramatic and according to the network cnbcwhich cites sources familiar with the situation, the lender could end up in receivership.