Fed vows tougher oversight as SVB fallout hits First Republic
STORY: The U.S. Federal Reserve on Friday released a scathing review of its own oversight of the now-shuttered Silicon Valley Bank, saying in a 114-page report that it failed to identify problems and push for fixes at the California lender before it collapsed in the biggest bank failure since the 2008 financial crisis.
The Fed's Vice Chair for Supervision said SVB's collapse "demonstrates that there are weaknesses in regulation and supervision that must be addressed."
While it was the regional bank's own mismanagement at the root of its downfall, the Fed said supervisors of the bank did not fully appreciate the problems and failed to appropriately respond when warning signs were identified.
The report said that, at the time of the bank's failure, Fed supervisors had identified 31 different problems that SVB managers needed to address - some of them requiring immediate attention - a level triple that of the bank's peers.
The historic run on the bank in March triggered massive deposit outflows at other regional banks.
New York-based Signature Bank failed two days after SVB was shut down. In a separate report out Friday, the FDIC said Signature's collapse was caused by "poor management" and a pursuit of "rapid, unrestrained growth" with little regard for risk management.
The report comes amid fresh signals the fallout is not over:
A source told Reuters on Friday that the FDIC is preparing to place San Francisco-based First Republic under receivership imminently, saying there was no more time to pursue a rescue through the private sector.
The Fed's assessment of its inadequacies came with promises for tougher supervision and stricter rules.
It also said it would look at tying executive compensation to fixing problems at banks to focus managers' attention on addressing weaknesses.