JACKSON, Wyo. — Wyoming Sen. Cynthia Lummis and 11 other senators sent a letter to the Federal Reserve Board of Governors about the recent collapse of Silicon Valley Bank (SVB), seeking answers on how regulators missed warning signs ahead of the bank run.
“It is gravely concerning that retail participants, utilizing only publicly available information, were able to identify clear and compelling examples of financial mismanagement and asset over-concentration at SVB, while the Fed, which can draw even deeper from non-public supervisory information, was unable to ascertain a similar conclusion,” states the letter, dated March 16.
The Federal Reserve is conducting an internal investigation into its supervision of SVB. The letter asks that the investigators focus on the role concentration risk played in the bank run.
According to the letter, SVB’s customer base consisted heavily of venture capital funds, venture investors and start-ups, “many of whom have or have had financial relationships or business partnerships with one another.”
The senators also noted that these types of customers are particularly prone to interest rate risk.
“Allowing such a high concentration of these rate-sensitive customers with primarily uninsured deposits at any single bank strikes us as a compelling risk to the stability of the bank, the banking system and to taxpayers writ-large that merits further inquiry,” states the report.
The letter also repeatedly points out that a comprehensive review is necessary to restore confidence in the U.S. banking system.
Sens. John Hickenlooper, D-Colo., Kevin Cramer, R-N.D., Chris Murphy D-Conn., Mike Rounds, R-S.D., Katie Britt, R-Ala., Bill Hagerty R-Tenn., Catherine Cortez Masto, D-Nev., J.D Vance, R-Ohio, Kyrsten Sinema, I-Ariz., Thom Tillis, R-N.C., and Michael Bennet, D-Colo. signed the letter along with Lummis.
