SACRAMENTO, Calif.–The failure of Silicon Valley Bank was the subject of a joint hearing by the California Senate Banking and Financial Institutions Committee and the Assembly Banking and Finance Committee. The committees said the objective of the hearing was to evaluate the adequacy of banking regulations and oversight of state regulators of the state-chartered Silicon Valley Bank, which had about $167 billion in assets at the time it failed following a deposit run.
California Department of Financial Protection and Innovation (DFPI) Commissioner Cloey Hewlett testified before the committees and discussed DFPI’s actions in response to the failure as well as its work in tandem with federal regulators.
Changes Being Examined
Hewlett told the hearing the department is focused on changes within the DFPI’s processes and procedures, and agreed the agency needs to increase focus and supervision of large state-chartered banks. She further said smaller community and regional banks should not be subject to the same standards as larger institutions.
For their part, elected officials probed for responses to questions around the bank’s leadership, uninsured deposits, the dual banking system, and where additional oversight is needed.
A consistent theme during the hearing was that the bank’s collapse was caused by failed bank leadership.
The state regulator has published a report on the failure: Review of DFPI’s Oversight and Regulation of Silicon Valley Bank.
According to the report, Silicon Valley Bank:
- Was slow to remediate regulator-identified deficiencies, and regulators did not take adequate steps to ensure the bank resolved problems as fast as possible
- Suffered from ongoing rising interest rates, which led to the bank’s startup deposits decreasing and its investments losing value, contributing to liquidity challenges
- Did not sufficiently account for in risk assessments
- Was hit by a run as the result of its high level of uninsured deposits (approximately 90% of funds)
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