US Bank Failures Shock Regulators

Regulators in the United States have been prompted to re-evaluate their supervision after the high-profile failures of Signature Bank, Silicon Valley Bank (SVB), and Silvergate Bank. The New York Department of Financial Services (NYDFS) and the US Federal Reserve Board have both published their internal reviews on the handling of the failures, which occurred in March.

SVB was closed by California regulators on March 10, and Signature Bank was moved against by the NYDFS on March 12. Silvergate Bank had announced its voluntary liquidation on March 8, setting off runs on the banks. The string of bank failures sent shockwaves through the financial industry, with U.S. President Joe Biden even feeling the need to tweet a response.

The Fed review of SVB's failure found that the bank's management failed to manage its risks, and supervisors "did not fully appreciate the extent of the vulnerabilities" of the bank as it "grew in size and complexity." The report noted that "SVB's foundational problems were widespread and well-known."

The NYDFS review of Signature Bank's failure highlighted areas where the regulator's supervision could have been more effective. The report noted that the bank's risk management and compliance programs were not adequate, and that the bank had a "lack of clarity" on its risk appetite.

The failures of these banks have prompted US regulators to re-evaluate their supervision of financial institutions. The NYDFS and the Fed have both acknowledged the need for improvements in their supervision and have pledged to take action to strengthen their oversight.

The failures have also raised concerns about the risks associated with banks that are friendly towards cryptocurrency. Both SVB and Silvergate Bank were known for their crypto-friendly policies, and some have speculated that their failures may be linked to their exposure to the volatile cryptocurrency market.

Overall, the failures of Signature Bank, SVB, and Silvergate Bank have highlighted the need for stronger regulatory oversight of financial institutions. While the NYDFS and the Fed have acknowledged the need for improvements in their supervision, it remains to be seen whether these improvements will be enough to prevent future bank failures.