Federal Regulators Gave the Green Light to Silicon Valley Bank’s Risky Investments
In the years leading up to Silicon Valley Bank’s recent collapse, federal regulators granted the bank a special exemption from a key rule put in place to prevent banks from engaging in risky investments.
A Silicon Valley Bank office is seen in Tempe, Arizona, on March 14, 2023. (Rebecca Noble / AFP via Getty Images)
In the years before Silicon Valley Bank (SVB)’s sudden failure, federal regulators gave the firm a special exemption from rules designed to prevent deposit-taking banks from engaging in risky investments and financial speculation, according to records reviewed by the Lever.
The move — which was a precursor to regulators later extending a similar exemption to the entire banking industry — coincided with Silicon Valley Bank, or SVB, continuing to invest in the high-risk venture capital industry in the lead-up to its collapse, which is the second-largest bank failure in US history.
As the federal government now protects SVB’s depositors from losses, the bank’s demise has touched off alarms about broader risk in the financial industry, just a few years after both lawmakers and federal bank overseers began rolling back some of the reforms that followed the 2008 financial crisis.
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