The Federal Reserve said in a postmortem report that the collapse of Silicon Valley Bank represented failure across the board, including at the central bank.
In the much-anticipated report released on Friday morning, the Fed said that while the United States banking system is “sound and resilient,” the SVB collapse demonstrated weakness in both regulation and supervision. The 118-page report is the culmination of an investigation spearheaded by Michael Barr, the Fed’s vice chairman for supervision.“Silicon Valley Bank failed because of a textbook case of mismanagement by the bank.
In March, just after SVB unexpectedly announced that it needed to raise capital, clients began to pull money from the financial institution, which had a big chunk of deposits in excess of the Federal Deposit Insurance Corporation's $250,000 insurance limit. On Friday, March 10, the FDIC announced that the bank had failed and regulators took control of the firm.
The resulting pandemonium spooked the markets, changed the expected trajectory of the Fed’s agenda for tightening monetary policy, and even resulted in other dominoes falling, for instance, the buyout of Switzerland-based megabank Credit Suisse by competitor UBS with the support of Swiss authorities.
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