Fed Vice Chair Michael Barr is expected to tell Congress on Tuesday that regulators issued warnings over Silicon Valley Bank’s risk management practices as early as 2021. Here are more issues to watch during this week’s hearings.
The nation’s top banking regulators will be grilled by Congress in a series of hearings this week focused on the potential failure of regulators to spot and correct poor risk management practices at Silicon Valley Bank and Signature Bank of New York.
Barr will seek to preempt criticism that the Fed missed signals that the bank was mismanaged. He is planning to tell Congress that regulators issued warnings over SVB’s risk management practices as early as 2021, according to prepared testimony.
Tom Hoenig, a former FDIC vice chairman and a former president of the Kansas City Fed, pushed back against the notion that SVB’s failure can be blamed primarily on regulators. Some Democrats will likely focus on the impact of a 2019 law that eased oversight of midsized institutions like Silicon Valley, with between $100 billion and $250 billion in assets. The legal change dovetailed with an effort by banking regulators to ease capital and liquidity rules for banks of SVB’s size.
The review will also seek to determine whether supervisors “have the tools to mitigate threats to safety and soundness” and whether the “culture, policies and practices” of the Fed support effective oversight of banks, according to Barr’s prepared testimony.
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