Key Takeaways From Michael Barr’s ‘Unflinching’ SVB Review
On Friday, Michael Barr released the Fed's internal review of its supervision and regulation of Silicon Valley Bank which, as you might've heard, failed recently. His findings weren't flattering. For anyone. Although Barr reiterated his criticism of bank management, he also said supervisors didn't do enough to ensure SVB fixed myriad problems flagged in the lead-up to the lender's spectacular implosion in March. The Fed board, he suggested, promoted a less assertive supervisory approach, and i
2 thoughts on “Key Takeaways From Michael Barr’s ‘Unflinching’ SVB Review”
Thanks much for including this document. Very enlightening. For more than 20 years I helped several banks create strategic plans that could be used to guide their actions and to meet the demands of regulators. One observation I would make is that bank regulation is an expensive and onerous process (for the banks, many people needed for many weeks) and for smaller institutions in complex markets, the more of a struggle it can be. The biggest bank I worked with had two billion in assets and annually faced a regular financial audit by its public accountant, an annual audit from the COC, and a Fed checkup, at the least. These guys, and their auditors get tired of all this and while I won’t say these folks get sloppy, they can get somewhat numb to critical risk factors. I dealt with dozens of these things over the years and I can’t even begin to understand what it must be like for JPM, and other large banks.
I don’t generally mess with individual banks in my investments, but I clearly recall at least a couple regionals that were sitting just below the old $50 billion threshold and doing everything they could not to grow their assets or deposit bases to stay below that threshold, sacrificing then-current performance to do so, as they eagerly awaited for the threshold to be raised. I understood the implications, but frankly was a little surprised (and turned off) that the increased regulatory burdens were considered THAT onerous that the better approach was to hunker down and hope for legislative relief even if that meant years of waiting.