Fed's Barr to release Silicon Valley Bank report Friday

Bloomberg News

Federal Reserve Vice Chair for Supervision Michael Barr will deliver his report on the failure of Silicon Valley Bank three days early.

Barr will share the findings from his review of the supervisory and regulatory handling of the failed bank at 11 a.m. on Friday, the Fed announced Tuesday afternoon. Initially, he had promised to share his findings by May 1.

The report is set to provide an accounting of the various factors that contributed to Silicon Valley Bank's precipitous demise on March 10, including the Fed's supervisory engagement with the bank and the regulatory requirements imposed upon it. 

"The report will include confidential supervisory information, including supervisory assessments and exam material, so that the public can make its own assessment," Barr told Congress on March 28. "Of course, we welcome and expect external reviews as well."

As Silicon Valley Bank's primary federal regulator, the Fed has been criticized for not doing enough to mitigate the risks at the bank, which ultimately fell prey to one of the largest bank runs on record. It saw $40 billion of deposits withdrawn in one day and another $100 billion of requests pile up before California regulators shuttered it on the morning of Friday, March 10. 

In testimony in front of the Senate Banking Committee on March 28, Barr said the report would explore the rapid growth of the Santa Clara, Calif.-based bank — which saw deposits balloon from $68 billion at the end of 2019 to $189 billion at the end of 2022 — as well as its management practices, which have been widely derided for failing to hedge against inflation risks and relying too heavily on uninsured deposits.

The long shadow of the 2023 banking crisis

In the week's since the bank's failure — which triggered a crisis in the banking sector that led to the failure of New York-based Signature Bank just two days later — Barr and other Fed officials have said Silicon Valley Bank's inability to account for "bread and butter" banking risks were the primary driver of its collapse. 

Barr said Fed supervisors raised these issues with management at Silicon Valley Bank several times in the months and weeks leading up to its failure. He said it was unclear why those issues were not addressed, but he hoped to determine that during his review.

Barr also insisted that the Fed will be "humble" in its self assessment and review several categories of its supervisory regime to see where it fell short. 

"Where we didn't take enough action, if the Federal Reserve supervisors didn't take enough action, we're going to be talking about that in our review and we expect to be held accountable," Barr told Congress.

He also laid out several topics that would be addressed, including how effective the Fed's supervisory approach is in identifying risks and determining threats to safety and soundness. It will also examine the tools at its disposal for forcing banks to mitigate risks, and its internal culture and policies for using those tools.

The findings from the report are expected to inform the Fed's ongoing reform efforts related to capital and liquidity requirements, stress testing and accounting standards, among other considerations.