Silicon Valley Bank a ‘Textbook Case of Mismanagement,’ Fed’s Barr Tells Senate
The failure of Silicon Valley Bank (SVB) was driven by a “textbook case of mismanagement,” Federal Reserve vice chair of supervision Michael Barr told a Senate hearing.
Appearing before the Senate Banking, Housing, and Urban Affairs on Tuesday, Barr diagnosed the driving force behind the financial institution’s collapse.
“SVB’s failure is a textbook case of mismanagement,” he said. “The bank had a concentrated business model, serving the technology and venture capital sector.”
In the early days of the coronavirus pandemic, SVB flourished as its assets tripled with “significant deposit growth.” The bank had then invested the proceeds of these deposits into long-duration assets, like Treasury securities, to bolster yields and enhance its profits. However, Barr noted, the primary mistake that the company made was not managing the interest rate risks of these securities….