The Federal Reserve was reportedly aware of Silicon Valley Bank’s risky practices more than a year before the California-based financial institution collapsed.
The Fed issued six citations after finding serious weaknesses in the bank's handling of risks during a 2021 review, The New York Times reported Sunday.
The bank did not fix its issues and by July 2022, it underwent a full supervisory review and was rated as having deficient governance and controls. Regulators restricted the bank to prevent it from using acquisitions to grow.
The San Francisco Federal Reserve Bank met last fall with senior leaders at Silicon Valley Bank to discuss the institution's ability to access cash in a crisis and how to weather rising interest rates.
Additional problems at the bank were discovered in early 2023 when it underwent what the Fed calls a "horizontal review," which assesses the risk management strength.
When government regulators seized control of Silicon Valley Bank on March 10, it was the second-largest bank collapse in U.S. history after the failure of Washington Mutual during the 2008 financial crisis.
Silicon Valley Bank's collapse is likely to spark a push for stricter financial oversight, the Times reported.
For example, one of the major concerns is that the bank's CEO Greg Becker was on the board of directors of the San Francisco Federal Reserve Bank until March 10. Board members do not supervise banks, but the situation does not make for great optics.
Related Story: FDIC Has Only About Half the Cash Needed to Cover Roughly $264B in Deposits at Failed Banks, Report
