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U.S. Regulators Face Senate Panel Over Silicon Valley Bank Collapse

U.S. regulators face scrutiny from a Senate panel over the collapse of Silicon Valley Bank amid concerns about risk management and the broader impact on investor confidence in the banking sector.

Federal Deposit Insurance Corporation President Martin J. Gruenberg and U.S. Senator Elizabeth Warren
Federal Deposit Insurance Corporation President Martin J. Gruenberg and U.S. Senator Elizabeth Warren

Regulators Criticize SVB's Risk Management

A top U.S. regulator criticized Silicon Valley Bank (SVB) executives for their poor risk management during a Senate panel on Tuesday. Lawmakers questioned why regulators failed to identify warning signs before the bank's collapse.

Federal Reserve Highlights SVB's Risk Modeling Issues

Michael Barr, the Federal Reserve's vice chairman for supervision, pointed out flaws in SVB's risk modeling and the absence of a chief risk officer. He emphasized that the bank's risk model did not align with reality.

Banking Sector Loses Confidence After SVB and Signature Bank Failures

The collapses of SVB and Signature Bank caused a widespread loss of investor confidence in the banking sector, leading to plummeting stocks and concerns of a financial crisis. Political pressure for improved oversight of banks and their executives has increased.

Senate Banking Committee Discusses Mismanagement

Members of the Senate Banking Committee discussed the mismanagement of the failed banks and questioned the role of Trump-era banking regulators. Both Republicans and Democrats acknowledged that the banks were mismanaged.

Republicans Question Regulatory Authority

Republicans, like Senator Tim Scott, questioned giving regulators more authority after the crisis. They argued that regulators should have identified and addressed the problems sooner.

SVB building
SVB building

Regulators Promise to Review Rules and Procedures

After the twin bank failures, regulators have committed to reviewing their rules and procedures while insisting that the overall system remains sound. They also assured that depositor funds are safe and sound.

Uninsured Deposits Highlighted as an Issue

Critics have noted that both banks, especially SVB, held huge amounts of uninsured deposits, which quickly fled at the first signs of trouble.

Calls for Stronger Rules and Oversight

Lawmakers, including Senator Sherrod Brown, emphasized the need for stronger rules and oversight to prevent similar failures in the future.

Regulators Eye Tightening Rules for Banks

Michael Barr and FDIC Chairman Martin Gruenberg indicated that they are considering stricter oversight and tightened bank rules, particularly for firms similar to SVB and Signature Bank.

Upcoming Hearings on Banking Tumult

This hearing is the first of several expected to address the recent banking turmoil, with regulators set to testify before the House Financial Services Committee and congressional leaders planning to question the former CEOs of the two failed banks.