Federal Regulators Ignored Warning Signs at Silicon Valley Bank Years Before Its Collapse
Five years before customers fled Silicon Valley Bank en masse, federal regulators acknowledged that the nature of the bank’s deposits made it especially susceptible to such bank runs — but did nothing to reduce the risk.
A man passes a sign Silicon Valley Banks headquarters in Santa Clara, California, on March 13, 2023. (Noah Berger / AFP via Getty Images)
As lawmakers look for clues about the corporate and regulatory failures at the root of the current bank crisis, a little-noticed report from the government’s top regulators could be one of the smoking guns. It shows that years before customers tried to flee Silicon Valley Bank (SVB) en masse, leading to its collapse, regulators knew that the nature of the bank’s deposits made it especially susceptible to such bank runs.
And yet despite that risk, no evidence has surfaced showing regulators did anything to reduce it. Instead, the Federal Reserve soon after approved SVB’s merger, declaring that the bank would not “pose significant risk to the financial system in the event of financial distress.”
Less than two years after that, regulators announced they would be bailing out the bank’s uninsured depositors.
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