Why Silicon Valley Financial institution failed? Fed model

Fed Vice chair for supervision Michael S. Barr in this testimony unpacks the SVB disaster:

SVB failed as a result of the financial institution’s administration didn’t successfully handle its rate of interest and liquidity threat, and the financial institution then suffered a devastating and sudden run by its uninsured depositors in a interval of lower than 24 hours. SVB’s failure calls for an intensive evaluation of what occurred, together with the Federal Reserve’s oversight of the financial institution. I’m dedicated to making sure that the Federal Reserve totally accounts for any supervisory or regulatory failings, and that we totally handle what went incorrect.

Fed will launch an in depth evaluation on Might 1 of the failure:

Our first step is to ascertain the information—to take an unflinching take a look at the supervision and regulation of SVB earlier than its failure. This evaluation will probably be thorough and clear, and reported to the general public by Might 1. The report will embody confidential supervisory data, together with supervisory assessments and examination materials, in order that the general public could make its personal evaluation.² In fact, we welcome and anticipate exterior opinions as properly.

From the footnote:

2. Usually, the Board doesn’t disclose confidential supervisory data. We’re sharing confidential supervisory data within the case of SVB as a result of the financial institution went into decision, and its disorderly failure posed systemic threat. 

Sit up for studying detailed evaluation of the disaster.

This entry was posted on March 30, 2023 at 5:13 pm and is filed below Academic research & research papers, Central Banks / Monetary Policy, Economics – macro, micro etc, Financial Markets/ Finance. You’ll be able to comply with any responses to this entry via the RSS 2.0 feed.
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