SVB leadership ‘failed badly’: Powell; suggests changes in banking supervision

Silicon Valley Bank management “failed badly”, said the president of the Federal Reserve (Fed), Jerome Powellbut said its collapse is not indicative of broader weaknesses in the banking system.

“It is not a generalized weakness of the banking system,” he said. Powell at a press conference after the latest Fed policy meeting.

Fed supervisors saw the bank’s exposure to liquidity and interest rate risks and moved to intervene, he said, but the speed of the bank run exceeded anything seen in the past.

“Suggests the need for changes in regulation and supervisionsimply because supervision and regulation have to keep up with what is happening,” he said. Powell.

Powell He refrained from offering any specific details, saying these changes will emerge from a study being conducted by Federal Reserve Vice President of Supervision Michael Barr and scheduled for May 1.

“My only interest is that we identify what has gone wrong… what Let’s evaluate what are the appropriate policies so that it does not happen againand that we apply those policies,” he said. Powell.

He said the process of weakening inflation is still proceeding slowly, but it is unclear what impact the latest round of banking sector woes will have on the economy and monetary policy.

“The disinflation process is underway, but price pressures remain resilient in the non-housing services sector.”

As for the impact of tightening financial conditions on reducing inflation, “we think it’s potentially quite real,” but also uncertain, and the Fed will have to keep an eye on it to see how it influences monetary policy, he said.

Powell assured that they will continue to closely monitor conditions in the banking system and will use “all necessary tools” to protect it.

“Our banking system is healthy, resilient, with strong capital and liquidity“Insisted the head of the Fed, who considered that recent events could lead to stricter credit conditions for households and businesses.

The central bank president made it clear that they will closely monitor the available data and the real effects of tighter credit conditions on economic activity, the labor market and inflation when making new decisions.

Federal Reserve bank examiners had flagged problems at Silicon Valley Bank as early as 2019. As of the second half of 2021, the bank received six subpoenas, it said Powell. (Reuters and EFE)