Fed Review Finds Supervisors Missed Silicon Valley Bank’s Risks a Year Before Its Collapse
Federal Reserve Vice Chair for Supervision Michelle Bowman said Friday that an independent review found the central bank's own staff knew, or should have known, that Silicon Valley Bank was vulnerable well before its March 2023 failure, according to CNBC.
Bowman announced the findings in a speech in London, saying the bank's deposit base was 94% uninsured and concentrated among venture capital-backed technology firms, a structure that made it prone to a sudden run once trouble surfaced.
The review was conducted by the consulting firm Starling Advisory Group, which Bowman said she engaged after being confirmed as the Fed's top bank regulator. She had first called for an outside review back in June 2023, months after the bank's collapse.
What the Review Found
According to Bowman's remarks, published by the Federal Reserve, supervisory staff knew or should have known about SVB's weaknesses as early as March 2022, roughly a year before the bank failed.
Despite that, staff did not push the bank to reduce its interest-rate risk or its concentrated deposit base.
The report attributed the delay in part to a long-standing culture of risk aversion inside the Fed's supervisory ranks. Staff believed it was safer to take no action unless certain that action was exactly right, Bowman said.
The review also found the delays were not caused by a 2018 bank deregulation law or by any directive from the prior Vice Chair for Supervision to ease up on oversight.
That official had already left the post in October 2021, before SVB's risks became most apparent, Bowman said.
Separately, the review found social media did not trigger the run on the bank and found no evidence it sped up withdrawals, a point Bowman highlighted in the report. Bowman said the review was not meant to assign blame, but to draw lessons for the future.
Political Fallout Over Barr's Role
The White House said the report implicated Fed Governor Michael Barr, who was appointed by President Biden in 2022 and held Bowman's current job during the 2023 banking crisis, CNBC reported. Barr has not issued a public response included in the available reporting.
The findings landed the same week Trump called the Fed board hostile, after Chairman Kevin Warsh joined a unanimous vote to raise interest rates for the first time since 2023, a move covered in networth.com's report titled “Fed Raises Rates to 3.75%-4%, First Hike Since 2023, With More Likely This Year”.
Neither Trump nor Warsh has announced any move to remove Barr from the board.
What It Means for Depositors
SVB's failure exposed how quickly uninsured deposits above the FDIC's $250,000 insurance limit can flee a bank under stress. Businesses and individuals holding large balances at a single institution carry that same exposure today.
The Fed's Board of Governors declined further comment beyond Bowman's remarks. Starling Advisory Group has not said whether it will release its full findings, and Bowman described Friday's disclosure only as an initial report.