The collapse of Silicon Valley Bank (SVB) has highlighted the need for banking system resilience, according to a top Federal Reserve official. Michael Barr, the Fed’s vice chair for supervision, told lawmakers that the bank had failed due to mismanagement and sudden panic among depositors. The interconnectedness of the US financial system ultimately led to contagion, he said. The collapse of SVB was feared to have serious repercussions on the wider banking system, with the possibility of uninsured depositors being unable to access their funds causing concern about the safety and stability of US commercial banks. Systemic risk exceptions for the failures of SVB and FDIC-regulated Signature Bank were approved, allowing the FDIC to guarantee all deposits, but investors in equity and other liabilities were not protected and suffered losses. Senior management at both banks was promptly replaced.
