2023-04-28 22:14:41
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US banking regulators acknowledged Friday, April 28, through reports, a role in the failure of several regional banks that rocked the financial system in March, and continue to have repercussions.
The Federal Reserve (Fed) and then the American Agency for Bank Deposits (FDIC) published a report in quick succession taking stock of their approach to the bankruptcy of two establishments, Silicon Valley Bank (SVB) and Signature Bank. Above all, the two institutions underlined an essential point: the failure of the two banks was first and foremost the consequence of errors by the respective managements, incapable of ” manage their risks » for SVB, or « develop and maintain adequate risk management practices » pour Signature Bank.
Reports quickly take the form of a MEA culpa on the part of the two organizations, which admit having their share of responsibility in the chain of bankruptcies which have shaken the American financial system and continue to have repercussions.
The highly anticipated Fed report on SVB set the tone, first admitting that the “ supervisors did not fully appreciate the extent of the vulnerabilities “of the bank, as the latter gained” in size and complexity “. Even though ” vulnerabilities have been identified “, its supervisory body did not ” reacted enough to ensure that SVB had fixed the problems quickly raised. “ The Federal Reserve failed to make the strong enough decisions that were needed “, recognized the vice-president of the Fed, in charge of supervision, Michael Barr, in a letter accompanying the report.
The FDIC, the agency that insures bank deposits up to a certain limit, admits that ” retrospectively », elle « should have gone faster » et « have more effective communication with the management of Signature Bank “. In question this time, Complications in terms of review staff resources “banks, which have” affected the timing and quality » supervision of the establishment. Signature Bank ” could have been more measured in its growth and put in place the necessary risk management practices, the FDIC for its part should have better anticipated and been more energetic in its supervision “, recognizes the agency again.
“Strengthen supervision and regulation”
Now to avoid for such a situation to happen againas regional banks continue to be shaken, like the First Republic bank, whose stock has lost more than 95% of its value in two months, and was still sinking on Wall Street on Friday. The Fed’s report thus proposes a series of actions to be implemented by the American central bank, in particular by imposing a reinforcement of the reserves concerning medium-sized banks.
Until now, the United States imposed the application of the so-called “Basel III” rules, only on its largest establishments, about fifteen in total. This wide range of international banking sector reforms was initiated after the financial crisis of 2008-2009 in order to strengthen the soundness of banks.
Many steps have been taken, but some reforms still need to be finalized, especially in the United States. But the bankruptcy of several regional banks, in the wake of the fall of SVB, and the difficulties that First Republic is now also going through, encourage it to ” strengthen the resilience of the financial system and not just focus on specific risks ». « After the Silicon Valley Bank failure, we need to strengthen Federal Reserve supervision and regulation based on what we have learned “said Michael Barr, adding that this report was” the first step in this process ».
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Proposals to this effect are planned for a later stage. More broadly, the report nevertheless recalls that the American financial system remains “ solid and resilient, with a high level of capital and liquidity “, adding that SVB was” an exception due to its highly concentrated business model ».
(With AFP)
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