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Committee Republicans Demand CA & NY State Regulators Provide Information on Supervisory Efforts Surrounding Recent Bank Failures
Washington, Mar 24 -
Republicans on the House Financial Services Committee are demanding the California and New York state-level regulators that supervised Silicon Valley Bank and Signature Bank, respectively, prior to their failures provide information regarding their supervisory efforts, coordination with federal regulators, and decision making regarding the failed banks. The Chairman of the Subcommittee on Financial Institutions and Monetary Policy, Andy Barr (KY-06), the Chairman of the Subcommittee on Oversight and Investigations, Bill Huizenga (MI-04), and Congresswoman Young Kim (CA-40), sent a letter to Commissioner Clothilde Hewlett of the California Department of Financial Services and Innovation (CDFPI). Read the full letter to CDFPI Commissioner Hewlett here. Read key excerpts from the letter to CDFPI Commissioner Hewlett below: “Rapid deposit withdrawals in early 2023 led the firm to reportedly sell relatively long-duration securities at prices below acquisition prices to obtain liquidity. The upside-down scenario on asset values occurred given the backdrop of the rapid, Federal Reserve driven interest-rate-hike program. “In addition to the decreased value of its assets, approximately 97 percent of deposits by value were, reportedly, uninsured at Silicon Valley Bank. This too should have been a regulatory red flag. This high concentration of uninsured deposit value represented an outlier relative to financial institutions of similar size. By contrast, regional banks have told our offices that they typically have closer to 50 percent of deposits by value insured. “According to reports, the supervisors from CDFPI and the Federal Reserve had clear indications that Silicon Valley Bank was deficient in both their interest rate risk management and balance sheet management that could have been mitigated before its failure. If these reports are accurate, it is concerning that supervisors did not intervene in a timely manner and use the supervisory and enforcement tools available to prevent the firm’s failure and subsequent market uncertainty. As policymakers, Congress needs to understand why supervisors failed to use their available tools to correct the firm’s numerous financial and management deficiencies.” The Chairman of the Subcommittee on Financial Institutions and Monetary Policy, Andy Barr (KY-06), the Chairman of the Subcommittee on Oversight and Investigations, Bill Huizenga (MI-04), Congressman Mike Lawler (NY-17), and Congressman Andrew Garbarino (NY-02), sent a letter to Superintendent Adrienne Harris of the New York Department of Financial Services (NYDFS). Read the full letter to NYDFS Superintendent Harris here. Read key excerpts from the letter to NYDFS Superintendent Harris below: “On the evening of March 12th, the U.S. Department of the Treasury (Treasury), the Board of Governors of the Federal Reserve System (Federal Reserve Board), and the FDIC issued a joint statement announcing that, among other things, the systemic risk exception to the least cost resolution mandate would be invoked to fully protect all depositors of both Silicon Valley Bank and Signature Bank. Notably, this was also the first time an announcement was made that the NYDFS had closed Signature Bank on March 12th, and appointed the FDIC as receiver. On March 18th, the FDIC conducted an auction for Signature Bank and accepted a bid from Flagstar Bank, N.A. to purchase the substantial majority of Signature Bank’s assets and liabilities. “Given the unprecedented speed with which the banks failed over a three-day period and the subsequent effects those failures had on the U.S. financial system, it is critical that policy makers understand the events leading up to and following the failure of Signature Bank.” ###