Bank supervision is typically conducted behind closed doors due to concern that publicising bank missteps could lead to bank runs
Federal Reserve Board vice chair for supervision Michael Barr, left, testifes at a House Financial Services Committee hearing on the response to the recent bank failures of Silicon Valley Bank and Signature Bank, on Capitol Hill in Washington, US, on March 29 2023. Picture: KEVIN LAMARQUE/REUTERS
“The culture of supervision is shrouded in secrecy, I hope that SVB calls for some of that veil of secrecy to be lifted,” said Aaron Klein, a fellow with the Brookings Institution and former Treasury Department official.“The regulators have all this secret information, some of which needs to be secret … but some of which would be made better if it were made public,” said Klein.
Representative Bill Foster, an Illinois Democrat, floated making MRAs public if not resolved within 60 days, or that bank executives would see their bonuses placed in escrow if they had unaddressed items. Despite SVB being on the radar for regional Fed supervisors at the Federal Reserve Bank of San Francisco for over a year, Barr said he first was made aware of interest-rate risks facing banks, and in particular SVB, at a briefing in mid-February, conceding it was a “fair question” why further action was not taken and the matter escalated.
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