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A top U.S. regulator told a Senate panel on Tuesday that Silicon Valley Bank executives did a “terrible” job of managing risk before the lender collapsed, as lawmakers demanded to know why warning signs of trouble were missed.
In the first congressional hearing into the sudden collapse of two U.S. regional lenders and the ensuing chaos in markets, the top banking regulator at the Federal Reserve criticized SVB for its risk modeling and lack of a chief risk officer.
“They were issued a matter requiring immediate attention based on the inaccuracy of their interest rate risk modeling,” Michael Barr, the Federal Reserve’s vice chairman for supervision, told lawmakers. “Essentially, the risk model was not at all aligned with reality.”
The failures of SVB, and days later, Signature Bank, set off a broader loss of investor confidence in the banking sector that pummeled stocks and stoked fears of a full-blown financial crisis.
Silicon Valley Bank collapse: What you need to know
Political pressure has also grown for better oversight of banks and the executives running them. Senior members of the Senate Banking Committee wanted to know how the firms ended up in such a precarious position, even as they agreed the banks had been mismanaged.
“The scene of the crime does not start with the regulators before us. Instead, we must look inside the bank, at the bank CEOs, and at the Trump-era banking regulators, who made it their mission to give Wall Street everything it wanted,” said Senator Sherrod Brown, who chairs the panel.
