Federal Reserve and Lawmakers Eye Bank Rules After Collapse

The stunning demise of Silicon Valley Bank has spurred soul-searching about how large and regional banks are overseen.

The Federal Reserve is facing criticism over Silicon Valley Bank’s collapse, with lawmakers and financial regulation experts asking why the regulator failed to catch and stop seemingly obvious risks. 

 

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...the shock waves that Silicon Valley Bank’s demise sent through the financial system, and the sweeping response the government staged to prevent it from inciting a nationwide bank run, are clearly intensifying the pressure for stronger oversight.

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“Clearly, there’s a problem with supervision,” said Daniel Tarullo, a former Fed governor who helped shape and enact many post-2008 bank regulations and who is now a professor at Harvard. ...

 

The Federal Reserve Bank of San Francisco was in charge of overseeing Silicon Valley Bank, and experts across the ideological spectrum are questioning why growing risks at the bank were not halted.

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Many people were wrong about the staying power of low rates, and “that includes regulators and supervisors, who are supposed to think about: What are the possibilities, and what are the scenarios?” said Jonathan Parker, the head of the finance department at the Massachusetts Institute of Technology’s Sloan School of Management.

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“All the regulators had to do was read the reports that Silicon Valley Bank was submitting, and they would have seen the problem,” Senator John Kennedy, Republican of Louisiana and a member of the Banking Committee, said on the Senate floor.