BPI Statement on Anniversary of SVB Failure

Washington, D.C. — BPI President and CEO Greg Baer released the following statement ahead of the one-year anniversary of Silicon Valley Bank’s failure:

Sunday will mark one year since the failure of Silicon Valley Bank, and there is still more unknown than known about how the FDIC managed the resolution. The FDIC has provided very little clarity, but all the available evidence suggests FDIC made missteps throughout the winddown of the bank—starting with the initial failed strategy on resolution weekend, followed by a protracted and confusing process to ultimately find a buyer. Then, late last month, the FDIC revealed its losses related to the resolutions of SVB and Signature could be much higher than previously announced – potentially over $4 billion, or 25%, higher. Analysis this week published by the American Bankers Association finds that the FDIC borrowed from the Fed despite having less expensive alternatives, and this may have added up to $2.5 billion to the cost to resolve the spring 2023 bank failures. These costs will be borne by healthy banks that had nothing to do with SVB’s failure. 

There has yet to be any comprehensive, public review of SVB’s resolution, including the decision to invoke the “systemic risk exception,” which allowed the FDIC to bypass the statutory least cost test and impose costs directly on other banks.

So, we are left with many unanswered questions:

  1. Was there a suitable buyer over resolution weekend that could have taken over SVB and avoided exercising the systemic risk exception?
  2. Was the FDIC welcoming to bids from the outset?
  3. How did the FDIC determine a least cost resolution was not possible and what were the assumptions used in that analysis?
  4. Has the FDIC maximized returns and minimized losses in the SVB and Signature receiverships? Why isn’t more information publicly available?
  5. What was the FDIC’s strategy for selling the large volume of mortgage-backed securities it assumed from the failed banks, and how was that strategy executed and by whom; more particularly, did the FDIC engage in unnecessary fire sales that drove down market values and ultimately reduced significantly the value of the assets it held?

It is no surprise the FDIC Inspector General puts staffing challenges and “readiness to execute resolutions and receiverships” at the top of its list of FDIC management concerns. Deposit holders and the American public deserve more accountability from the FDIC. The full story of what the FDIC has been doing, or failing to do, over the past year is long overdue.

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The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

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