Fed releases SVB review findings and new supervisory operating principles

Vice Chair for Supervision Michael Bowman announced the initial findings of the Starling Advisory Group's independent review of Silicon Valley Bank's collapse and issued a new Statement of Supervisory Operating Principles that immediately reshapes how the Federal Reserve supervises banking organizations.

The report, the first in a series, answers three questions about whether supervisory staff identified SVB's vulnerabilities, why prompt action was not taken, and whether supervisory actions contributed to the failure. It finds that staff knew, or should have known, about the bank's unrealized securities losses, a deposit base that was 94 percent uninsured, and a lack of readiness to use the discount window as early as March 2022, yet did not require the bank to reduce interest-rate risk or concentration of vulnerabilities. The delays were not caused by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 or any directive from the former Vice Chair, who stepped down in October 2021. Instead, a long-standing culture of risk aversion and unclear decision-making authority impeded decisive action, and analysis found no evidence that social-media chatter triggered the run.

In response, the Fed issued a Statement of Supervisory Operating Principles that redefines supervisory objectives as early identification of threats to safety, soundness, and financial stability, and the prompt, decisive mitigation of those threats. The principles shift examiner focus from procedural footnotes to material risks, expand supervisory tools to include observations alongside MRAs and enforcement actions, and require examination teams to submit monthly reports to supervision heads identifying any uncertainty about required actions.

Bowman emphasized that the findings are not about assigning blame but about learning lessons to prevent recurrence. He noted that the new operating principles and reporting requirements are intended to empower examiners, clarify decision rights, and address the risk-aversion culture that hampered earlier oversight. The Fed's commitment, he said, is to ensure a banking system that is safe, sound, and resilient for the American people.