The Federal Reserve launched a review of its oversight and regulation of Silicon Valley Bank on Monday after the bank collapsed Friday.
Fed Chairman Jerome Powell announced that Vice Chairman for Supervision Michael Barr would lead the review. The report will be released to the public on May 1, 2023.
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“The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve,” Powell said in a news release.
SVB, which was the 16th largest federally insured bank, was closed by regulators in the state Friday. The shutdown came after attempts to raise capital failed. The bank failure is the largest since 2008. The bank scared investors earlier in the week when it announced that it sold off Treasurys at a loss, causing a run on the bank.
Barr supported the review, agreeing that the bank closure deserved a careful examination of the supervision and regulation the reserve used on the firm.
“We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” Barr said in the release.
Although there are fears that the failure of SVB and subsequent closure of the New York-based Signature Bank, which closed on Sunday, was a repeat of the 2008 economic crisis, White House press secretary Karine Jean-Pierre told reporters that was not the case.
“This is not 2008,” Jean-Pierre said. “The Obama-Biden administration put in place tough requirements to ensure banks have more capital and sufficient liquid assets. Depositors have more protection for their deposits, and regulators have the tools to supervise larger institutions that deal with disruptions.”
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President Joe Biden said the federal government will not bail out the banks, but he guaranteed SVB would have deposits, including uninsured amounts, so customers would have access to their money as early as Monday.
“All customers who had deposits at these banks can rest assured, rest assured they’ll be protected and they’ll have access to their money as of today. That includes small businesses across the country that bank there and need to make payroll, pay their bills, and stay open for business,” Biden said Monday morning. “No losses will be borne by the taxpayers.”
