(Washington) The Federal Reserve (Fed) acknowledged on Friday, in a report concerning the bankruptcy of the American bank SVB, a series of failures on the part of its supervisory body which did not allow it to act in time to avoid the collapse of the establishment.
Admittedly, the Fed emphasizes in the first place the inability of the management of Silicon Valley Bank (SVB) to “manage their risks”, but it also recognizes that it did not take the appropriate decisions once the risks were known.
But she also admits to having her share of responsibility in this bankruptcy which shook the American banking system for several weeks and continues to have repercussions.
First, the “supervisors did not fully appreciate the extent of the vulnerabilities” of the bank, the report said, as the latter gained “in size and complexity”.
But even more, even though “the vulnerabilities have been identified”, its supervisory body has not “reacted sufficiently to ensure that SVB had solved the problems sufficiently quickly” raised.
“The Federal Reserve failed to take the strong enough decisions that were needed,” acknowledged Fed Vice President, in charge of supervision, Michael Barr, in a letter accompanying the report.
“I welcome this thorough and self-critical report, and agree with and support the recommendations to strengthen our rules and supervisory practices,” Fed Chairman Jerome Powell said in a statement.
The report indeed proposes a series of actions to be implemented by the American central bank, in particular by imposing a reinforcement of the reserves concerning the medium-sized banks.
Until now, the United States imposed the application of so-called “Basel III” rules only on its largest establishments, about fifteen in total.
“Basel III”, a wide range of international banking sector reforms, was launched after the financial crisis of 2008-2009 in order to strengthen the soundness of banks. Many steps have been taken, but some reforms still need to be finalized, especially in the United States.
But the bankruptcy of several regional banks, in the wake of the fall of SVB, and the difficulties experienced by another, First Republic, are now prompting it to “strengthen the resilience of the financial system and not focus only on specific risks “.
“After the failure of Silicon Valley Bank, we must strengthen the supervision and regulation of the Federal Reserve based on what we have learned”, underlined Michael Barr, adding that this report was “the first step in this process”. .
Proposals to this effect are planned for a later stage.
More broadly, the report nevertheless recalls that the American financial system remains “solid and resilient, with a high level of capital and liquidity”, adding that SVB was “an exception due to its highly concentrated business model”.