Recent media reports have indicated that Silicon Valley Bank collapsed due to a run on “US$42 billion” within 48 hours, but Federal Reserve (Fed) Vice Chairman of Financial Supervision Barr said on Tuesday (28th) that the figure actual was “US $142 billion”, “, the running storm was much better than expected.
In the first hearings in the US House and Senate on the collapse of Silicon Valley Bank (SVB) and Signature Bank, Barr revealed on Tuesday that GMB customers withdrew $42 billion from the bank on March 9 alone. next day, which led regulators to decide to close Silicon Valley Bank on March 10.
“On the morning of March 10th, the bank told us that based on client requests, they expected a much larger outflow, totaling $100 billion in outflows that day as planned,” Barr revealed.
A run of $142 billion within 48 hours accounted for 81% of Silicon Valley Bank’s $175 billion in deposits at the end of last year.
Barr said that although the Fed did its best to meet Silicon Valley Bank’s withdrawal request through the discount window, the bank did not have enough collateral, and they could not meet their obligations to pay depositors, so they were closed.
The three major financial regulators outline the blueprint for bank reform
Republican lawmaker Tim Scott slammed a hearing on Tuesday that US regulators on all sides appeared to have been asleep, after a series of regional bank failures sparked congressional questions about the failings of the big three financial regulators. Democratic Senator Warren (Elizabeth Warren) pressed the three major financial regulators to admit taking tougher measures to prevent the nightmare of bank failures from happening again.
Barr denied that the collapse of the Silicon Valley bank was a regulatory failure, saying instead that it was a textbook case of bank mismanagement, as bank managers failed to properly address clear interest rate risk and liquidity risk.
However, Barr said the Fed expects to strengthen the capital and liquidity standards of banks with assets greater than US$100 billion and strengthen the resilience of the banking system. This statement specifically supports revising the 2018 bill to loosen banking supervision .
Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation (FDIC), also said that there is a need to strengthen prudential supervision of these institutions, especially in terms of capital, liquidity and interest rate risk.
Treasury Undersecretary for Domestic Financial Affairs Nellie Liang said she was looking forward to the upcoming regulatory proposals.
Previously, Federal Reserve Chairman Jerome Powell admitted that the speed of bank runs was unprecedented, and the management of Silicon Valley Bank made serious mistakes. The Federal Reserve will strengthen its regulatory capabilities.
Recently, the President of the United States Biden (17th) called on Congress to expand the mandate to regulators, so that bank executives responsible for the failure of financial institutions will be severely fined, their salaries will be recovered , and will be banned from working in the financial industry. in the future.
