© Reuters. FILE PHOTO: An employee holds the door open at the Silicon Valley Bank branch office in downtown San Francisco, California, U.S., March 13, 2023. REUTERS/Kori Suzuki/File Photo
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By Ann Saphir
(Reuters) -Responsibility for the Federal Reserve’s oversight of large financial institutions like the failed Silicon Valley Bank rests with staff in Washington and not with any regional Fed bank chief, a former chair of the San Francisco Fed bank said on Friday.
“I do not believe that (San Francisco Fed Bank President) Mary Daly is responsible for the regulatory mishaps in the SVB situation,” said Alex Mehran, who served on the San Francisco Fed’s board of directors for six years including two as its chair. “The responsibility for enforcing those regulations is not the purview of the (Reserve Bank) president, it’s the purview of the regulators in Washington.”
SVB’s sudden demise two weeks ago is under intense scrutiny, and Democratic U.S. Senator Elizabeth Warren said she does not have faith in Daly after the collapse.
Next week, lawmakers in both houses of the U.S. Congress hold public hearings on the issue, and have called Fed Vice Chair of Supervision Michael Barr to testify.
Barr is heading up a Fed review of the situation, due to be published May 1.
Supervision of large banks like SVB, which was the 16th biggest U.S. bank at the time of its failure, is a shared responsibility of bank examiners employed by the regional Fed bank and Fed Board staff in Washington.
Fed Chair Jerome Powell said this week he wants to identify “what went wrong here”. Bank examiners at San Francisco Fed had flagged escalating problems at the Santa Clara-based bank suggesting issues with its ability to meet short-term cash needs like depositor withdrawals.
Federal regulators closed SVB on March 10 after it was unable to meet rapid and massive demands from depositors for their money.
That was soon followed by closure of Signature Bank (NASDAQ:) and emergency action by the Fed and the Treasury to shore up confidence in the banking sector. The fallout has continued, with UBS buying rival Credit Suisse, big U.S. banks staging a rescue of smaller First Republic, and banking shares under continued pressure.
Republicans on the Senate Banking committee this week asked Daly and Powell for internal records on oversight of the bank, including Daly’s own calendar.
As San Francisco Fed chair, Mehran headed the search committee that hired Daly for the top job at the bank in 2018. Reserve bank directors do not have a role in supervision or regulation.
