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Washington, April 29 – The US Federal Reserve said that it failed to act with “sufficient force and urgency” in its oversight of Silicon Valley Bank (SVB), which collapsed last month in the country’s biggest bank failure since 2008, the media reported.
The conclusion is one of the main findings from the Federal Reserve’s investigation of the episode, reports the BBC.
It sparked global fears about the state of the banking industry.
The review comes as another US lender, First Republic, remains in trouble.
US regulators are reported to be working on a potential rescue for the struggling firm, which was the 14th largest bank in the US at the end of last year.
Michael Barr, the Federal Reserve’s vice chair for supervision, who led the review, said the US central bank should toughen its rules in response to what it had learned from SVB’s demise, the BBC reported.
“Federal Reserve supervisors failed to take forceful enough action,” he said, pointing to regulatory standards that were “too low”, supervision that did not work with urgency, and risks to the wider system posed by troubles at a mid-size bank that Fed policies had missed
“Following SVB’s failure, we must strengthen the Federal Reserve’s supervision and regulation,” he said.
The head of the Federal Reserve, chairman Jerome Powell, said he welcomed the “thorough and self-critical report”.
“I agree with and support his recommendations to address our rules and supervisory practices, and I am confident they will lead to a stronger and more resilient banking system,” he said.
The report from the Fed was one of three published by US officials on Friday, detailing regulatory lapses that contributed to the failures of SVB and Signature Bank last month.
Both banks catered to business customers and ran into trouble after the US central bank raised interest rates sharply last year which is when customers started to withdraw money.
SVB’s subsequent announcement that it needed to raise funds last month prompted panic and billions of dollars were withdrawn overnight, forcing regulators to step in, the BBC reported.