Source: United States Senator for New Jersey Bob Menendez
WASHINGTON, D.C. – U.S. Senators Bob Menendez (D-N.J.) and Mike Rounds (R-S.Dak.) were joined by Sens. Catherine Cortez Masto (D-Nev.), Thom Tillis (R-N.C.) and Cynthia Lummis (R-Wyo.), all members of the Senate Committee on Banking, Housing and Urban Development, in pressing the U.S. Federal Reserve on whether it used its authority to apply enhanced supervision and prudential standards to Silicon Valley Bank (SVB) Financial Group. Prior to its failure, SVB controlled $212 billion in assets, falling short of the statutory threshold that defines all institutions with total assets over $250 billion as systemically important. However, the Federal Reserve has statutory authority to apply enhanced supervision and prudential standards to any bank holding company with total assets over $100 billion as necessary to prevent systemic risk.
“[T]he bank’s failure prompted the Board to unanimously vote to invoke the systemic risk exemption provided under 12 U.S.C. 1823(c)(4)(G) to safeguard uninsured depositors at SVB and Signature Bank. By invoking this authority, the Board made it clear that they viewed SVB’s collapse as systemic risk that warranted an extraordinary regulatory response,” wrote the senators to Chair Jerome Powell. “[…] In order to better understand how the Federal Reserve exercised its statutory authority under 12 U.S.C. 5365(a)(2)(C), we ask that you answer [if] the Board of Governors, at any point in the past five years, appl[ied] or consider[ed] applying enhanced supervision or prudential standards to the SVB Financial Group.”
The senators also asked if the Federal Reserve ever exercised its authority under 12 U.S.C. 5365(a)(2)(C) to apply enhanced supervision or prudential standards to any bank holding company with assets between $100 billion and $250 billion.
The bipartisan oversight request was sent ahead of today’s Senate Committee on Banking, Housing and Urban Committee’s hearing to examine the SVB collapse and the federal regulatory response.
Find a copy of the letter HERE and below:
Dear Chair Powell,
We write to request information from the Federal Reserve regarding its authority provided by 12 U.S.C. 5365(a)(2)(C) to apply enhanced supervision and prudential standards to banks. Specifically, we request further information on what, if any, actions the Fed took to apply these enhanced standards to Silicon Valley Bank (SVB) Financial Group.
As you are well aware, 12 U.S.C. 5365(a)(2)(C) empowers the Board of Governors (Board) to apply enhanced supervision and prudential standards to bank holding companies with total consolidated assets greater than $100 billion, provided the Board determines such standards are appropriate to “prevent or mitigate risks to the financial stability of the United States…or to promote the safety and soundness of the bank holding company…”
Prior to its failure, SVB Financial Group controlled $212 billion in assets, falling short of the statutory threshold that designates all institutions with total assets over $250 billion as systemically important. Nonetheless, the bank’s failure prompted the Board to unanimously vote to invoke the systemic risk exemption provided under 12 U.S.C. 1823(c)(4)(G) to safeguard uninsured depositors at SVB and Signature Bank. By invoking this authority, the Board made it clear that they viewed SVB’s collapse as systemic risk that warranted an extraordinary regulatory response.
In order to better understand how the Federal Reserve exercised its statutory authority under 12 U.S.C. 5365(a)(2)(C), we ask that you answer the following questions:
1. Did the Board of Governors, at any point in the past five years, apply or consider applying enhanced supervision or prudential standards to the SVB Financial Group under 12 U.S.C. 5365(a)(2)(C)? Why or Why not?
2. Did the Federal Reserve ever exercise its authority under 12 U.S.C. 5365(a)(2)(C) to apply enhanced supervision or prudential standards to a bank holding company with assets between $100 billion and $250 billion? If yes, please describe each instance.
We ask that you respond to these questions by close of business on April 10. Thank you for your time and attention to this matter.
Sincerely,
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