Fed Was in Talks With Silicon Valley Bank to Use Discount Window Before Collapse

The Federal Reserve officials were in discussions with Silicon Valley Bank (SVB) to use its discount window, right before its collapse earlier this month, according to reports.

Michael Barr, the Fed’s vice-chair for supervision, told the House Financial Services Committee that the blame for the sudden collapse of SVB, on March 10th, can be spread around to the bank’s executives, Fed supervisors, and other government regulators. The regulators were alerting superiors over issues with the bank for months.

The bipartisan committee grilled top regulators on why no one acted harder to investigate the looming crisis, admitting that supervisor staff previously raised concerns over the bank’s interest-rate risk and liquidity management last November.

The Fed and FDIC are due to release their reports on the failure of Silicon Valley Bank before May 1 with the Fed’s report focusing on weaknesses regarding supervision and regulation whilst the FDIC study will look at bank deposit insurance. Meanwhile, crises in financial markets have eased since Swiss regulators forced UBS to buy its failing rival Credit Suisse, and many investors still remain wary of further problems regarding the solidity of the banking sector.

The White House has asked Congress to reinstate the regulations on midsize banks that were removed five years ago, following the removal of which, some Democrats have blamed a law which loosened bank regulations in 2018 for the crisis.

SVB was also unique in that its business model was highly concentrated in the tech and start-up sectors, including those in China.