The pair also signaled that new bank rules are in the works, such as tightening up requirements for larger regional banks and how to police heavy reliance on uninsured deposits.
Gruenberg said the FDIC is also reviewing the deposit insurance system, and lay out options for policy changes. The Biden administration ultimately decided to guarantee all deposits at those two banks to stave off broader panic, forgoing the existing limit of $250,000 per person.
Barr said SVB's collapse was a "textbook case of mismanagement," citing the firm's concentrated business model, exceedingly fast growth, failure to manage its interest rate risk, and reliance on uninsured deposits.
Barr said supervisors for the Fed, which was the bank's primary regulator, found several deficiencies with the bank in 2021 and 2022, and ultimately imposed restrictions on its growth. But, he noted, the full extent of the bank's weakness was not apparent until the March 9 bank run, and it was up to management to address underlying issues.
"It is not the job of supervisors to fix the issues identified; it is the job of the bank's senior management and board of directors to fix its problems," his testimony states.
On regulation, Barr said the Fed is looking into whether SVB would have better managed its risk if it had still faced stricter oversight, as well as higher capital and liquidity requirements. Banks with assets between $100 billion and $250 billion saw their scrutiny relaxed as part of a 2018 bank deregulation bill.
Gruenberg also defended the FDIC's handling of SVB after its closure, in which it took over two weeks
to line up a new buyer . He said the agency received only one "valid offer" for the bank's deposits the weekend SVB failed, and it would have cost the FDIC more to sell than to liquidate the firm's assets.
Once the new relief efforts kicked in and the FDIC was
given more flexibility to consider offers, Gruenberg said the
FDIC received 27 bids from 18 bidders for various parts of SVB.
The FDIC announced Monday it would backstop a deal for regional
lender First Citizens BancShares to acquire the bank's
assets.
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Silicon Valley Bank deal offers beleaguered banking investors
relief U.S. backstops Silicon Valley Bank sale to First Citizens SVB deal soothes broader markets, but default stress haunts
banks Banking stress puts U.S. and Europe on watch for credit crunch Fed's Kashkari: Banking stress brings U.S. closer to recession -
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(Reporting by Pete Schroeder; Editing by Chizu Nomiyama and
Andrea Ricci)
