Regulatory Note SVB III — Fed Report – Supervisory and Regulatory Changes
THIS IS THE THIRD IN A SERIES OF REGULATORY NOTES ON THE SILICON VALLEY BANK AND SIGNATURE BANK FAILURES AND THEIR CONSEQUENCES. THE FIRST TWO NOTES ARE AVAILABLE HERE AND HERE.
Yesterday, April 28, the Federal Reserve released its “Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank” (the “FRB Report”). At the same time, the FDIC issued FDIC’s Supervision of Signature Bank (the “FDIC Report”), and GAO published “Bank Regulation: Preliminary Review of Agency Actions Related to March 2023 Bank Failures” (the “GAO Report”). The FRB Report is the most extensive and suggests several changes to both supervision and regulation. The FDIC Report is more limited with suggestions for further study of the FDIC’s examination process, and the GAO Report is strictly a factual history.
What does the FRB Report mean for my bank? Several of the Fed’s suggestions would involve banking firms of all sizes. The most controversial portion of the FRB Report is the discussion of statutory, regulatory, and supervisory changes in 2019 that reduced the regulatory burden on firms of SVB’s size. The analysis of these events will dominate future discussions of post-SVB reforms, but modifications to the supervisory and regulatory framework suggested by the Fed are not confined to these institutions.
The below chart summarizes how the Fed (and, by implication, the FDIC and the OCC) may re-focus supervision, which it can do in the near term, and how it may develop new regulations or amend existing ones, which will be a multi-year process. The Fed’s suggestions are arranged by risk or other area of concern.
