The Collapse of SVB and Signature Bank: Where Were the Regulators and KPMG?
The collapse of Silicon Valley Bank (SVB) and Signature Bank, reminds us of the stream of bank failures since the 1970s that have created concerns about the ability of bank officials and regulators to oversee the liquidity and risk-taking activities of banks and other financial institutions.
SVB fell victim to a run-on deposit. Initially, customers tried to withdraw $42 billion—about a quarter of the bank’s total deposits. The flood of withdrawals destroyed the bank’s finances. It had poured large amounts of deposits into U.S. Treasury investments and other government-sponsored debt securities whose market value declined as the Federal Reserve raised interest rates over the past year.
State regulators closed New York-based Signature Bank, the third largest failure in the U.S. banking history, and two days after authorities shuttered SVB in a collapse that stranded billions in deposits. US prosecutors had been investigating Signature Bank’s work with crypto clients before regulators suddenly seized the lender.
Depositors’ confidence in the soundness of these institutions evaporated after it was reported that the banks could not meet depositor attempts to withdraw money from their accounts, generating a classic bank run that led federal regulators to step in.