The US Senator wants to make responsible bankers accountable.
(Photo: AP)
new York After the collapse of Silicon Valley Bank (SVB) and Signature Bank, Washington discussed the responsibility of the responsible bankers. Democratic Senator Elizabeth Warren called for an investigation – and lamented “mismanagement.”
This emerges from a letter from Warren on Sunday, from which the Wall Street Journal quotes. In the letter to the Treasury Department, the FDIC and the Federal Reserve, Warren called for an investigation into the management and oversight of the banks prior to their collapse. Preliminary results should be submitted within 30 days.
“Bank executives who took unnecessary risks or failed to insure themselves against fully foreseeable threats must be held accountable for those failures,” warned Warren, a member of the Senate Banking Committee and an influential critic of the financial industry. The “mismanagement” was “made possible by a series of failures by the legislature and the supervisory authorities”.
Other MPs are also calling for light to be shed on the top bankers’ decisions. The supervision of medium-sized financial institutions is under scrutiny.
President Joe Biden on Friday called on Congress to expand supervisors’ powers to hold bank executives accountable. The Financial Services Committee of the House of Representatives plans to hold a hearing on the collapses on March 29 and call FDIC chief Martin Gruenberg, among others, as a witness. The Ministry of Justice and the Securities and Exchange Commission are also investigating the SVB case.
As the “Financial Times” reports, the consulting division of the financial giant Blackrock had already warned the SVB management of weak risk controls at the beginning of 2022. These would be “significantly below” those of the competition. According to a January 2022 risk control report, SVB lagged behind peer banks on 11 out of 11 factors examined. However, the SVB leadership rejected further investigations.
Regional banks under pressure
After the collapse of three smaller institutions since the beginning of March, US bank customers transferred billions in deposits to large banks last week, which are more strictly regulated and better able to absorb turbulence. According to Bloomberg, Bank of America alone received more than $15 billion in new deposits.
Regional bank shares continued to come under pressure. The focus is particularly on the First Republic Bank from San Francisco, whose papers have lost a good 80 percent of their value in the past ten days. The bank is looking for a buyer and considering other strategic options, it said at the end of the week.
The Association of Medium-sized US Banks (MBCA) fears a rush of customers to the financial institutions. According to media reports, the institutes have asked the US deposit insurance fund FDIC for insurance for all deposits by savers for the next two years.
Confidence in the banking system as a whole must be restored immediately. Should another bank collapse, this will lead to further panic withdrawals from other institutions. MBAC says it has around 110 banks with total assets of up to $100 billion.
Meanwhile, US regulators continue to look for buyers for the insolvent SVB. North Carolina-based regional bank First Citizens BancShares is said to be among those interested. However, no official bids have been announced yet. Star investor Warren Buffett is also said to be in contact with high-ranking government officials. Details did not leak out.
More: Warren Buffett apparently intervenes in the banking crisis