Michael Barr, Statement/Q&A: Committee on Banking, Housing, and Urban Affairs (Senate)
Q&A
“Beginning in November of 2021, the board… Sorry, the Federal Reserve Bank brought forward these problems to the bank (SVB) and they failed to address them in a timely way. That exposure led the firm to be highly vulnerable to a shock, and that shock came on the evening of Wednesday, March 8th, when it very belatedly attempted to adjust its liquidity position and reported losses on its available for sales securities. The market reaction to that was quite negative, and that eventually on Thursday sparked a depositor run.”
“Nonetheless, on Thursday morning, things appeared calm according to the bank’s report to supervisors, but later Thursday afternoon, deposit outflows started and by Thursday evening we learned that more than $42 billion, as you had indicated, had rushed out of the bank.”
“On Friday morning, it appeared that it might be possible to meet the outflow that was expected the day before, but that morning the bank let us know that they expected the outflow to be vastly larger based on client requests and what was in the queue. A total of $100 billion was scheduled to go out the door that day. The bank did not have enough collateral to meet that, and therefore they were not able to actually meet their obligations to pay their depositors over the course of that day and they were shut down.”
“Yes, we intend to make our report fully public on May 1st, and that report will include… Normally, it’s not our practice to include, but that report will include confidential supervisory information, such as the exam reports.”
“Senator, we haven’t made a definitive conclusion on that. We’re undertaking this review of SBV’s failure in order to better assess whether it would be appropriate to change capital rules and liquidity rules for this size firm, for firms more generally. We’re looking at that right now.”
“I anticipate the need to strengthen capital and liquidity standards for firms over a hundred billion dollars.”
Opening Statement
“Our banking system is sound and resilient, with strong capital and liquidity. The Federal Reserve, working with the Treasury Department and the Federal Deposit Insurance Corporation (FDIC), took decisive actions to protect the U.S. economy and to strengthen public confidence in our banking system. These actions demonstrate that we are committed to ensuring that all deposits are safe. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools for any size institution, as needed, to keep the system safe and sound.”