Federal Reserve Supervision Criticized for Inaction on Bank Risk Post-SVB Failure
Federal Reserve Vice Chair for Supervision Michelle Bowman recently delivered a speech acknowledging that Fed supervisory staff were aware of Silicon Valley Bank's (SVB) interest rate risk and uninsured deposit concentration vulnerabilities in 2022, prior to its 2023 failure. However, supervisors reportedly failed to take prompt action due to a long-standing culture of risk aversion and a lack of clarity regarding supervisory decision rights. Critics, including the author of the source article, argue that despite Bowman's speech and some announced supervisory changes, such as a Statement of Supervisory Operating Principles and monthly escalation reports, little has fundamentally changed in Fed supervision since the failures of SVB, First Republic, and Signature Bank. The author contends that the absence of quantitative bright lines for bank examiners, particularly concerning interest rate risk, continues to be a critical vulnerability. The U.S. General Accountability Office (GAO) has also raised concerns a...
