Blame heaped on US regulators and Trump-era bank deregulation law
28 March 2023 - 20:33Federal Reserve vice-chair for supervision Michael Barr testifies at a Senate banking committee hearing, on Capitol Hill in Washington, the US, March 28, 2023. Picture: EVELYN HOCKSTEIN/REUTERS
“They were issued a matter requiring immediate attention based on the inaccuracy of their interest rate risk modelling,” Barr, the Fed’s vice-chair for supervision, told the Senate Banking Committee. “Essentially, the risk model was not at all aligned with reality.” Fed supervisors brought those issues to SVB’s CFO in October 2022, he said, and raised additional concerns to SVB management in November. But Barr said the issues were not brought to his attention until a staff presentation last month.”
While legislators in both parties agreed the banks were mismanaged, Republicans reserved ire for regulators as well, who they said should have identified and addressed the problems sooner. Senator Tim Scott, the panel’s top Republican, cast doubt on giving regulators more authority in the wake of the crisis.
Barr said he welcomed outside independent reviews of the Fed’s supervision of SVB, in addition to the central bank's own internal review. “It may be tempting to look at all this and say, we don’t need new rules. The real problem was these arrogant executives,” said Brown. “But there will always be arrogant executives. That’s exactly why we need strong rules.”
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