SVB collapse: Top bank regulators to testify before Congress as lawmakers are split on who to blame
Cami Mondeaux
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A panel of some of the country’s top banking regulators is set to testify before the Senate Banking Committee on Tuesday morning as lawmakers investigate the recent banking failures that led to the collapse of Silicon Valley Bank and Signature Bank earlier this month.
The committee will hear from senior officials at the Federal Reserve, Treasury Department, and the Federal Deposit Insurance Corporation as it grills the financial experts on what regulators did, or didn’t do, in order to prevent similar incidents in the future. The hearing is expected to be the first of several as lawmakers seek to determine the cause of the collapses and consider measures to prevent future shortcomings.
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“It is critical that we get to the bottom of how Silicon Valley Bank and Signature Bank collapsed so that we can maintain a strong banking system, protect Americans’ hard-earned money, and hold those responsible accountable, including the CEOs,” Sen. Sherrod Brown (D-OH), chairman of the Senate Banking Committee, wrote in a letter to the financial regulators ahead of their testimony on Tuesday.
Lawmakers will hear from three witnesses during the Tuesday hearing, including Michael Barr, the Fed’s vice chairman for supervision. Barr is expected to outline SVB’s failures to manage its interest rate and liquidity risk — denouncing it as a “textbook case of mismanagement,” according to his prepared remarks released on Monday.
However, Barr will also take aim at Congress for previous legislation that loosened regulation on banks such as SVB.
“At the time of its failure, SVB was a ‘Category IV’ bank, which meant that it was subject to a less stringent set of enhanced prudential standards than would have applied before 2019,” Barr is expected to say. “They include less frequent stress testing by the Board, no bank-run capital stress testing requirements, and less rigorous capital planning and liquidity risk management standards.”
Those comments echo similar sentiments from Sen. Elizabeth Warren (D-MA), who introduced legislation earlier this month that would abolish Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act and restore certain provisions used to overhaul the U.S. financial system in the aftermath of the 2008 recession.
Warren’s legislation specifically targets a Title IV provision that raised the asset threshold to $250 billion for banks to be regulated as “systemically important.” That rollback, Warren argued, led to the deregulation and subsequent collapse of SVB and Signature Bank, prompting the frenzy and strain on the stock market.
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Republicans are expected to fire back on those accusations, seeking to focus on the mistakes made by regulators and what role, if any, social media had to do with the panic surrounding the bank collapses.
Lawmakers will also include testimony from Nellie Liang, undersecretary for domestic finance for the Treasury, and Martin Gruenberg, chairman of the FDIC. The three witnesses are expected to testify again before the House Financial Services Committee on Wednesday.