US Fed raised concerns about Silicon Valley Bank at least four years before collapse
US Federal Reserve began sounding the alarm about Silicon Valley Bank's risk management arm starting at least four years ago in 2019
San Francisco: The US Federal Reserve began sounding the alarm about Silicon Valley Bank’s (SVB’s) risk management arm starting at least four years ago in 2019, according to a report.
In January 2019, the Fed issued a warning known as a ‘Matter Requiring Attention’, a citation a step-down from an enforcement action, about SVB’s risk-management systems, The Wall Street Journal reported, citing documents from a presentation circulated last year to employees of SVB’s venture-capital arm.
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The presentation reportedly said the Fed again warned SVB in 2020 that its system to control risk did not meet the expectations for a large financial institution, or a bank holding company with more than $100 billion in assets. The bank at that time was in a period of rapid growth as deposits flooded in at the early onset of the Covid-19 pandemic, Fox Business reported.
According to the Journal, the presentation notes that SVB’s average level of interest-earning assets grew 76% in the first quarter of 2021, compared with the same period one year earlier.
Federal Deposit Insurance Corp. data show SVB’s assets grew to $114 billon at the end of 2020, up from the bank’s $70 billion in 2019 the year the Federal Reserve first raised eyebrows.
SVB had nearly twice as much in assets from 2020 to the end of 2021, clocking in at about $209 billion, Fox Business reported.
Questions remain around why SVB was allowed to double in size after the Fed raised concerns about the bank’s risk management systems. A Federal Reserve review of its oversight of SVB is due by May.
