The recent bank failures of Silicon Valley Bank (SVB) and Signature Bank have sparked concern among finance officials about the speed at which these banks collapsed. SVB went from a functioning regional lender to being seized by regulators in just 36 hours after a bank run that saw $42 billion of deposits yanked in 24 hours, with another $100 billion queued for the door before the bank was shut down. Signature Bank's failure took only marginally longer. As regulators prepare to release post-mortems on what went wrong, the speed of these failures remains a primary focus.
The Federal Reserve and Federal Deposit Insurance Corporation are examining whether bank examiners could have acted more quickly to prevent these bank failures. There are also concerns about whether banks are adequately prepared for such circumstances, including familiarity with the tools they may need in such a situation, such as how to access the US central bank's emergency lending facilities.
The reports on the failures of SVB and Signature Bank are expected to include policy recommendations and confidential supervisory information. The supervisory regime at both regulators is under scrutiny from lawmakers on both sides of the aisle who have questioned why bank examiners weren't more aggressive in pursuing fixes at the failed banks.
Some policymakers argue that rules relaxing the strictest oversight for firms holding between $100 billion and $250 billion in assets, which included SVB and Signature, are partly to blame. If the failures of these banks are seen as a "canary in the coal mine" for problems that could occur more frequently in the future, bigger changes in the regulatory regime may be necessary.
Overall, the recent bank failures have highlighted the need for greater communication, preparedness, and urgency in the supervisory process. As Atlanta Fed President Raphael Bostic said, "we've all got to basically operate like we're on yellow alert at all times."
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