FILE – People gather outside the Santa Clara branch of Silicon Valley Bank on March 10, 2023. California's bank regulator failed to act quickly enough to address the problems at Silicon Valley Bank, according to its own report released Monday, May 8
NEW YORK, NY (AP) - California's banking regulator claimed Monday that the state was too slow in recognizing the growing risks of Silicon Valley Bank. It also said it did not take enough action to force the bank to correct its problems.
The California Department of Financial Protection and Innovation released a report that echoed findings from a Federal Reserve report on its own supervision of Silicon Valley Bank. The Fed criticized its own role in Silicon Valley Bank's failure. It said that its supervisors had been too slow or unwilling to push the bank management to resolve issues.
Silicon Valley Bank failed and collapsed on 10 March after its depositors raced to withdraw tens billions of dollars in a 21st Century bank run. The failure of Silicon Valley Bank has caused a series of aftershocks that have shaken up the financial system. Signature Bank and First Republic Bank both failed, while several other banks are in severe financial distress.
California is the epicenter of the financial turmoil. Last week, regulators closed San Francisco's First Republic and sold it to JPMorgan Chase. PacWest Bank in Los Angeles was hammered by the financial markets after First Republic failed last week.
In its report, the DFPI stated that staffers were too slow to realize how rapidly First Republic and Silicon Valley Bank expanded in response to COVID-19. They took on deposits worth billions of dollars. The report also said that staffers failed to recognize the risks associated with banks growing too large too fast.
The agency said that its staff was unaware of the risks that could be posed by the large number of uninsured depositors at Silicon Valley Bank.
DFPI announced that it would increase its staffing in order to supervise banks with assets exceeding $50 billion and those with high concentrations in deposits in a particular sector. Silicon Valley Bank, for example, had a large number of deposits concentrated in the technology industry.