Federal banking regulators today testified before the House Financial Services Committee during the first of five congressional hearings this week on the recent bank failures, where they were pressed on why supervisors did not elevate concerns raised about Silicon Valley Bank ahead of its closure. In addition, former top executives from SVB and Signature Bank testified before the Senate Banking Committee on the failures.
The Federal Reserve last month released a report faulting SVB’s management for its failure but also identifying instances in which agency supervisors failed to elevate problems they found at the bank. More recently, Fed Governor Michelle Bowman suggested that the agency should appoint a third party to conduct an independent review of the Fed’s handling of SVB. Asked whether he agreed with that recommendation, Fed Vice Chairman for Supervision Michael Barr suggested that third-party review is coming through congressional oversight and reviews by the Office of Inspector General and Government Accountability Office. “I think there are such reviews going on already,” he said.
Barr was also asked why the Fed was exploring stronger capital rules if he believed banks were well-capitalized—something he has said repeatedly. “The capital in the system is strong—it might need to be the case that it is stronger, and the banking system might need more capital to be resilient precisely because we don’t know the nature of the kinds of ways we might experience shocks to the system, as has happened with these recent bank failures,” Barr said.
In the Senate, former SVB CEO Greg Becker faulted “unprecedented” interest rate increases and a social media-fueled bank run for the failure of his institution. “I never imagined that these unprecedented events could happen to SVB and strongly believe that the leadership team and I made the best decisions we could with the facts, forecasts and outside expert advice available to us at the time, and that we made these decisions in good faith and in the best interests of SVB, its employees and its clients,” Becker said.
