On Tuesday, the US Senate Committee on Banking and Housing , , and Urban Affairs, also known as the Senate Banking Committee, held hearings to discuss recent US bank failures and regulatory responses. Digital assets and crypto businesses were mentioned throughout the testimony. Senate Banking Committee Chairman Sherrod Brown claimed on Tuesday that undersigned banks “found themselves in the middle of Sam Bankman-Fried’s crimes on cryptocurrency exchange FTX.”
Regulators highlight banks’ exposure to crypto businesses at Senate Banking Committee hearings on bank failures
Silvergate Bank, Silicon Valley Bank, Signature Bank Following the bankruptcy, the Senate Banking Committee held hearingsto discuss the situation and its implications. Witnesses at the hearing included Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg. Michael Barr, Deputy Chairman for Oversight of the Federal Reserve Board; In addition to committee chair Sherrod Brown and executive Tim Scott, the Treasury Department’s undersecretary of domestic finance, Nellie Liang.
Senate hearings on the recent bank failures are currently underway. All three witnesses are people I named as architects of OCP2.0https://t.co/xRQ8LONpGA
— nic 🌠 carter (@nic__carter) 2023 3 Mon 28
“Now the executives who failed these banks are not barred from other banking jobs and some have been repaid.” , and no one has paid the fine,” Brown explained. “Some executives took refuge in Hawaii. Some already worked for other banks. Some simply wandered off into the sunset.” said it was preparing a bill that would strengthen regulators’ ability to collect bonuses and bar executives responsible for bank failures from ever working for another bank again.
Wow.. Barr told the Senate Bank that the SVB told regulators on Friday that he had $100 billion to fly off. If you don’t think we’re in a new world with the potential for lightning-fast bank runs, you’re not paying attention.
— Steve Liesman (@steveliesman) 2023 March 28, 2019
FDIC Chairman Gruenberg discussed exposures to the cryptocurrency business related to bank failures. $11.9 billion in deposits,” and said deposits exposed to FTX represent “less than 10% of total deposits.” The chair also mentioned Signature Bank’s cryptocurrency customers and both Silvergate and Signature digital currency payment systems. Gruenberg said those banks held long-term government bonds and were unprepared for interest rate hikes after the Covid-19 pandemic.
“The common denominator between the failure of Silvergate Bank and the failure of SVB was the accumulation of losses in the banks’ securities portfolios,” Gruenberg said.
The FDIC Chairman said the situation involving both Signature Bank and Silicon Valley Bank “requires more extensive investigation by both regulators and policymakers.” Fed’s Michael Barr added that the SVB’s downfall was due to management’s inability to deal with interest rate adjustments and bank runs. “The SVB failed because the bank’s management did not manage interest rate and liquidity risks effectively, and the bank suffered a devastating and unexpected run-off by uninsured depositors within the next 24 hours. ‘ emphasized Burr.
Barr stressed the importance of developing a better understanding of current banking operations “in light of evolving technology and new risks.” The Federal Reserve has “analyzed” recent events and variables such as “customer behavior, social media, focused and novel business models, rapid growth, deposit execution, interest rate risk, and other factors.” said it does. A representative for the US central bank added that with all these new variables emerging, regulators should rethink how they supervise and regulate US financial institutions. “And how we think about financial stability,” Barr concluded.
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