Senators grill federal officials over lack of oversight into SVB, Signature Bank collapse

During a Senate hearing on March 28, regarding the failure of crypto-friendly bank Silicon Valley Bank (SVB) and its signatories, William Barr, the top official of the U.S. Federal Reserve, said: acknowledged the potential benefits of testing higher interest rates. And he expressed plans to expand the scope of future tests.

At a Senate panel hearing, a senior US regulator defended bank watchdogs from lawmakers who accused them of failing to detect warning signs leading to the collapse of the SVB.

“Typical example of mismanagement”

Barr said at the hearing that the bank did a “terrible” job managing risk before it collapsed and that its closure was “a classic example of mismanagement.”

Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, known as the FDIC, added when pressed by a number of senators why neither knew or warned about the collapse.

Georgia Senator Warnock reiterated claims that multiple executives within the bank cashed in millions of dollars worth of stock just weeks before the SVB collapse.

Others put pressure on officials over a lack of oversight by either the FDIC or the Fed itself, with senators assessing the health of each bank prior to failure, but more broadly, overseeing them. We also assessed the health of the institutions intended to do so—the FDIC and the Federal Reserve. Self-sufficient.

The Dodd-Frank Act is a recurring theme

The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd-Frank, was enacted by Congress in 2010. The law was introduced in response to the 2008 financial crisis to increase transparency and accountability, promote financial stability and protect consumers.from abusive practices

Many senators referred to the bill at hearings and failed to anticipate the impending financial crisis.

“I mean, this business is all good, and the Dodd-Frank amendments prevented them from stress testing. The way I see it, you chose not to stress test. “Had we stress tested Silicon Valley Bank, we wouldn’t have found the problem,” Kennedy added.

Senator Ramis of Wisconsin added to this set of questions, highlighting specific rules or changes he would propose to better assess risk, financial stability, security and soundness.

“Are fractional reserve banks overly risky in this era of online banking?” Lumis asked.

“Banks are safe and sound. Depositors need to be confident that their deposits are safe,” Burr replied.

While the true cause of SVB’s demise won’t be revealed until its scheduled May 1 report, Barr said it was linked to a variety of factors, including poor risk management practices and excessive exposure to high-risk loans. I concluded that I believe it was caused by a factor. , especially those belonging to government bonds.

Barr denied responsibility for the Fed, saying: “The risk was there, regulators pointed it out and banks didn’t act.”

Democratic Rep. He promised to do more to hold the signing executives accountable.

“SVB and Signature executives must take huge risks and be held accountable for blowing up the banks, and will soon introduce a bipartisan bill to do just that.”