SVB collapse: Fed reportedly raised repeated risk management concerns with bank

The Federal Reserve raised repeated concerns about the risk management practices of Silicon Valley Bank, according to reports.

In January 2019, the Fed warned SVB about its system to control risk, as reported by the Wall Street Journal on Sunday. The bank received numerous additional warnings from the central bank in 2020 and 2021, indicating that its problems had been on the Fed’s radar long before the collapse.

In a review of SVB conducted in 2021, the Fed found “serious weaknesses in how it was handling key risks,” the New York Times reported on Sunday. The Federal Reserve Bank of San Francisco also issued six citations to the growing institution, which flagged that the bank was not ensuring that it had easy access to enough cash in the event of a crisis.

SVB was closed down by banking regulators earlier this month, just two days after announcing that it needed to raise more than $2.2 billion to survive, sending its stock price plunging over 60% in 48 hours. The failure of SVB is the second-largest in U.S. banking history, while Signature Bank, which also collapsed, is the third-largest.

These collapses led to a week of uncertainty for several regional banks and some bigger lenders. Regional bank First Republic Bank and Swiss lender Credit Suisse both accepted rescue packages from larger institutions to shore up their liquidity. Credit Suisse announced on Sunday that it had reached a deal to be acquired by rival bank UBS, a move the U.S. Treasury and Federal Reserve said would “support financial stability.”

The White House has urged Congress to strengthen regulations to prevent an industry-wide collapse of smaller banks, while Democrats are split on the issue and Republicans are united against it.