Federal Reserve Vice Chair Identifies Supervisory Failures Before SVB Collapse

Federal Reserve Vice Chair for Supervision Bowman said a newly released independent review found that supervisors failed to act appropriately on known vulnerabilities before Silicon Valley Bank failed in 2023. Bowman said she commissioned the review earlier this year to examine SVB's failure and related Federal Reserve supervision. Bowman argued that earlier reports were expedited, limited in scope and incomplete, perpetuating unreliable conclusions. Bowman said the preliminary findings substantiated failures to act promptly and communicate actionable guidance to SVB.

The review found that frontline examiners, risk and surveillance specialists, and Reserve Bank and Board staff knew about SVB's interest rate and liquidity risks at least nine full months before the Federal Deposit Insurance Corporation placed SVB in receivership. The review concluded that long-standing uncertainty about decisionmaking authority and unclear accountability impeded timely decisions. Bowman said the preliminary review corrected earlier accounts blaming social media for the bank run or statutory tailoring and regulatory changes for the Fed's failure to act. The review instead identified long-standing accountability and decisionmaking problems as the most significant contributors to delayed critical enforcement actions addressing core risks. The review found that supervisory attention often focused on processes, procedures, governance and controls rather than mitigating underlying interest rate and liquidity exposures. Bowman said SVB had 54 matters requiring attention or immediate attention between 2019 and failure, but none required SVB to address core financial risks.

Bowman argued that supervisory decisions must rest on evidence, legal authority and judgment, but decisions are effective only when delivered in time. Bowman said early identification gives banks more flexibility to reduce exposures, strengthen liquidity, improve contingency plans or raise capital under normal market conditions. Bowman warned that repeatedly waiting for more evidence, concurrence or committee meetings undermines supervisory effectiveness. Bowman said different Federal Reserve groups identified risks and others were expected to concur, but no individual clearly owned the obligation to decide and advance action. Bowman argued that surveillance, specialist teams and cross-institution data analysis are valuable only with a clear route from information to judgment and action.

Bowman said the Federal Reserve is considering a more direct allocation of responsibility, authority and accountability between Board and Reserve Bank staff. Bowman said the Federal Reserve is also considering clear decision rights for examiners and supervisory leadership, alongside direct escalation channels to senior supervision leadership. Bowman said the Board published a Statement of Supervisory Operating Principles in the fall of 2025. Bowman said the principles have been refined, most recently to incorporate lessons from the independent review of the 2023 banking stress. Bowman said the principles improve transparency and accountability by emphasizing early material-risk identification, sound judgment, and timely, proportionate action before risks threaten institutional safety or financial stability.

Bowman said the reforms and review findings apply to supervisors beyond the United States. Bowman said she has engaged member jurisdictions on modernization as chair of the Financial Stability Board's Standing Committee on Supervisory and Regulatory Cooperation. Bowman said the FSB's 2026 work program reflects countries' assessments of whether regulatory and supervisory frameworks remain suitable for future financial systems. Bowman argued that modernization means better prioritization rather than less supervision, including reassessing accumulated processes and clarifying how supervisors can reach timely decisions. Bowman argued that proportionality means directing attention according to an institution's size, complexity, activities, business model, interconnectedness and potential financial-stability impact. Bowman said a community bank conducting conventional lending and deposit-taking does not need the same approach as a global institution conducting complex trading and cross-border activities.

Bowman argued that supervisors must distinguish threats to safety and soundness from issues presenting less financial risk. Bowman warned that treating every issue equally favors easily documented and measured matters over risks requiring experience, synthesis and judgment. Bowman said the objective should be addressing the most important risks while action can still change outcomes, not maximizing supervisory findings. Bowman urged the Basel Committee on Banking Supervision and the FSB to remain evidence-driven and prioritize core safety, soundness and financial-stability mandates.

The independent review found that the BCBS and FSB relied unquestioningly on incomplete reports compiled shortly after SVB's failure, Bowman said. The review found that both bodies copied language nearly verbatim from United States reports that lacked complete or accurate information. The review determined that the international bodies generally repeated existing claims rather than independently verifying information or broadening supporting evidence. Bowman said purported lessons from then-Vice Chair Barr's April 2023 report were initially used to justify additional regulatory work, including at the BCBS and FSB. Bowman argued that this work was inherently flawed and unjustified because the work relied on incomplete and faulty initial findings rather than broader analysis.

Bowman described the BCBS's mandate as strengthening worldwide regulation and supervision to enhance financial stability, and the FSB's purpose as coordinating and promoting effective financial-sector policies for global financial stability. Bowman argued that both institutions must protect credibility by concentrating on material risks and avoiding work that diverts resources to less valuable priorities. Bowman said the institutions must rigorously validate data and analysis used for international standards and regulations to avoid undermining regulatory effectiveness and institutional credibility. Bowman called for continued reassessment of supervisory processes as the financial system changes, with success measured by supervisors' ability to identify material risks and act when intervention can have the greatest impact.