Reports by Fed and FDIC Reveal Vulnerabilities Behind 2 Major US Bank Failures – Bitcoin News

On Friday, Michael Barr, the vice chair for supervision at the U.S. Federal Reserve, published a report on the vulnerabilities that led to the ultimate failure of Silicon Valley Bank (SVB). In addition, Marshall Gentry, the chief risk officer of the Federal Deposit Insurance Corporation (FDIC), released a similar report on Signature Bank’s collapse and its overreliance on uninsured deposits.

Fed Is Confident Supervisory Recommendations ‘Will Lead to a Stronger and More Resilient Banking System’

The Federal Reserve and the FDIC published reports on Friday concerning the fall of the second and third-largest U.S. bank failures in history. The first report, published by the Fed’s vice chair for supervision Michael Barr, claims the central bank’s supervisors failed to recognize the extent of vulnerabilities at Silicon Valley Bank (SVB) as it grew in size and complexity. Barr wrote that SVB had 31 open supervisory findings while other banks had much fewer in comparison.

The report offers a comprehensive perspective, noting that the Federal Reserve’s supervisory approach failed to fully contemplate the ramifications of rising interest rates. Then a slowing activity in the technology sector, ultimately paved the way for the demise of SVB. “The supervision of SVB did not work with sufficient force and urgency, and contagion from the firm’s failure posed systemic consequences not contemplated by the Federal Reserve’s tailoring framework,” Barr said. Barr’s report mentions crypto three times and one instance is located on a bar chart describing risks.

“As I have previously announced, the Federal Reserve has begun to build a dedicated novel activity supervisory group to focus on the risks of novel activities (such as fintech or crypto activities) as a complement to existing supervisory teams,” Barr stated.

FDIC Report Discusses Crypto Risks and SBNY’s ‘Flurry of Negative Press’

The FDIC published its report on Signature Bank’s (SBNY) collapse and the report authored by Marshall Gentry talks a lot more about crypto assets and the FTX failure. Throughout the report, Gentry discusses how liquidity risk management witnessed withdrawals of uninsured deposits rise to critical levels. On page 13, the FDIC report goes into great detail about the crypto industry turmoil that bolstered SBNY’s failure. ”The strategy exposed SBNY to greater susceptibility to liquidity, reputation, and regulatory risk due to the uncertainty and…