Highlights from Senate hearings on recent bank failures
The Silicon Valley bank failure sent a wave of panic across the financial system in early March, setting off a chain of disruptions that local banks are still grappling with. The third-biggest bank failure in U.S. history — and how to prevent something like it from happening again. Nellie Liang, US Treasury Secretary for Domestic Finance. Federal Reserve Vice Chairman for Oversight Michael Burr spoke of the tumultuous events that sent the financial system into a frenzy. Panicked customers attempted to withdraw a staggering $100 billion from Silicon Valley banks on the day the tech bank was shut down by regulators. Silicon Valley Bank on March 9, the day before it closed, Barr said Tuesday. He also detailed how SVB leaders failed to effectively manage interest rates and cash shortage risks. The .SVB failure was “a classic example of mismanagement,” Barr said. Fixing the balance sheet only made matters worse. “The bank waited too long to address the problem. Barr added that risk management and internal controls were “poor.” “Our banking system is sound and resilient, with strong capital and liquidity,” Barr said. We are committed to ensuring that all deposits are secure.We will continue to closely monitor the situation in the banking system and, where necessary, provide all deposits to institutions of all sizes to keep the system safe and sound. The FDIC’s Gruenberg said the failure of the SVB and its signatories “shows the financial stability implications of a bank with more than $100 billion in assets. “The prudential regulation of these institutions deserves to be taken seriously.” Particular attention should be paid to capital, liquidity and interest rate risks.” “Bank executives could get in trouble Former SVB CEO Greg Becker sold more than $2 million in bank stock in late February and $1.1 million in January. received about $10 million in compensation last year, and Joseph DePaolo, the former CEO of Signature Bank, received about $8.6 million. he said. Potential consequences include banking bans, civil penalties, or restitution payments. The House Financial Services Committee will continue to ask its own questions. Tuesday’s hearing is likely to be the first of many lawmakers.CNN ‘s Matt Egan and Krystal Hur contributed to this report.
of Silicon Valley Bank downfall A wave of panic swept through the financial system in early March, setting off a chain of disruptions that local banks are still grappling with.
Now MPs are in the midst of turmoil Investigate what caused it The 2nd and 3rd largest bank failures in US history — and how to keep it from happening again.
Members of the Senate Banking Committee on Tuesday morning Federal Regulators Investigated: Martin Gruenberg, Chairman of the Board of the Federal Deposit Insurance Corporation. Nellie Liang, US Treasury Secretary for Domestic Finance. Federal Reserve Vice Chairman for Oversight Michael Burr spoke of the tumultuous events that sent the financial system into a frenzy.
Customers of Silicon Valley Bank
New details revealed during the hearing highlight that the Silicon Valley Bank run has become the second-largest bank failure in American history.
Panicked customers attempted to withdraw a staggering $100 billion on the day Silicon Valley Bank was shut down by regulators, Barr said Tuesday.
Officials previously revealed that customers successfully withdrew $42 billion from Silicon Valley Bank on March 9, the day before the bank closed.
Mismanagement led to SVB failure
in him testimonyBarr, the Fed’s vice chairman for oversight, also detailed how the SVB’s leadership worked could not be managed effectively Interest rate and cash shortage risk.
Barr said SVB’s failure was “a classic example of poor management.”
A Fed official said the SVB’s belated efforts to fix its balance sheet only made matters worse.
“Banks have taken too long to address the problem,” Barr said. ,” he said, adding that there had been “insufficient” risk management. and internal controls.
“On social media, stories of withdrawals surged and uninsured depositors quickly fled,” Barr said.
Regulators say banks are safe
Federal Reserve officials echoed comments from other top regulators in assuring the public about the safety of their banks.
“Our banking system is healthy and resilient, with strong capital and liquidity,” Barr said. “We are committed to ensuring that all deposits are safe. We will continue to closely monitor the situation in our banking system and, where necessary, will assist institutions of all sizes to keep our system safe and sound. I have all the tools ready to use.”
Related video below: Senator Elizabeth Warren interacts with economic officials at hearings
The FDIC’s Gruenberg said the failures of SVB and Signature Bank “shown the financial stability implications of banks with more than $100 billion in assets. The prudential regulation of these financial institutions, in particular the capital and liquidity It deserves serious attention in terms of volatility and interest rate risk.” .”
Bank executives could get in trouble
Gruenberg and Barr confirmed Tuesday that they are considering serious action against bank executives.
Former SVB CEO Greg Becker sold more than $2 million in bank stock in late February and sold $1.1 million in January ahead of the bank’s collapse, according to recent Securities and Exchange Commission filings. sold its shares.
Becker was paid around $10 million last year. Former CEO of Signature Bank, Joseph DePaolo, received approximately $8.6 million.
Both the FDIC and the Federal Reserve have the power to take back some of that money and even punish bank executives.
“The board has the power to bring legal action against individuals who have violated the law, engaged in unsafe or unsound practices, or breached fiduciary duty,” Barr said. .
“We have retained this power even after the bank failed and we stand ready to use this power to the fullest based on the facts and circumstances,” he said. Potential consequences include bank bans, civil penalties, or restitution payments.
Gruenberg said his agency is already investigating the actions of the failed bank’s officers, executives and other officials.
more hearings are coming
On Wednesday, the House Financial Services Committee will continue to ask its own questions.
Tuesday’s hearing could be the first of many as lawmakers ponder and debate potential changes to financial regulation and oversight.
Former CEO of SVB, Greg Becker. Joseph DePaolo, the former CEO of the undersigned bank, which also collapsed, is being asked to testify at a later date.
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CNN’s Matt Egan and Krystal Hur contributed to this report.
https://www.wgal.com/article/senate-hearings-on-bank-failures/43437188 Highlights from Senate hearings on recent bank failures
