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Silicon Valley Bank was solely to blame for its failure. This was the conclusion reached by important financial regulators in the United States during the appearance of the executives responsible for the recent bank collapses in that country. On Tuesday they appeared before the Senate, and on Wednesday the investigations will continue in the House of Representatives.
They want to know the reasons and those responsible for the failure of Silicon Valley Bank (SVB). US senators questioned top banking regulators in a hearing they hope will end with tougher rules for financial institutions.
For the high officials of the Federal Reserve of the United States (FED), the managers of the bank did not take the necessary measures to solve their problems, despite the fact that the central bank had warned that its “unusual business model” could lead to a possible crisis.
“This is a textbook case of bank mismanagement. Bank risk says interest rate risk and liquidity risk. Those are basic banking problems. The company was quite aware of those problems. The regulators had told them. Investors were talking about interest rate problems and liquidity risk,” said Michael Barr, vice president of the Federal Reserve.
This is the first formal investigative hearing by the US Congress to learn the internal reasons for the bank’s collapse on March 10. That day multiple frightened clients withdrew their money following the advice of certain venture capital firms, the capital raising bled the bank dry and fractured its structure.
With the bankruptcy of the SVB, came the collapse of Signature Bank days later, and both became the second and third largest bankruptcies in the history of the world’s largest economy.
The bank crashes brought widespread distrust, hit stock markets around the world and revived fears of the 2008 financial crisis. However, US officials ruled out at the time, and repeated it on Tuesday, that a scenario similar can be repeated.
“Our banking system is strong and resilient, with strong capital and liquidity. The Federal Reserve, in collaboration with the Treasury Department and the FDIC, took decisive action to protect the American economy and strengthen public confidence in the banking system. These actions demonstrate that we are committed to ensuring that all deposits are secure,” Barr said.
“We will continue to closely monitor conditions in the banking system and stand ready to use all of our tools for institutions of any size as needed to keep the system safe and sound,” it added.
Sen. Tim Scott, the top Republican on the panel, questioned giving regulators more authority in the wake of the crisis.
“The warning signs should have been flashing red. If you can’t stay in the mission and enforce the laws as they’re already on the books, how can you ask Congress for more authority with a straight face?” Scott said.
With Reuters and AP
