(The hearing is scheduled to begin at 10 a.m. ET. Please refresh the page if the above video doesn’t play at the moment.)
The nation’s top bank regulators will face tough questions for the primary time Tuesday about how Silicon Valley Bank and Signature Bank collapsed practically overnight earlier this month.
Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, Michael Barr, vice chair for supervision on the Federal Reserve and Nellie Liang, undersecretary for domestic finance on the Treasury Department will all testify before the Senate Banking Committee at a hearing on the recent bank failures starting at 10 a.m.
The regulators will even defend the selections they made within the hours after the collapse, particularly the unanimous vote to invoke the systemic risk exception to the FDIC’s deposit limit, in keeping with their written testimony released ahead of the hearing.
This allowed the FDIC to ensure a whole bunch of billions of dollars in uninsured deposits on the banks, money which may otherwise have been worn out.
Each Republicans and Democrats on the 29-member panel questioned whether these deposit guarantees amounted to a government bailout for wealthy account holders.
But in keeping with Barr, regulators were more afraid that in the event that they didn’t backstop deposits, what began as a contained shock could explode right into a full-blown financial crisis.
“The prospect of uninsured depositors not with the ability to access their funds could prompt depositors to query the general safety” of all U.S. banks, he said in his prepared remarks.
While the witnesses Tuesday agree that loads of blame lies with the banks’ executives, additionally they say the collapse of SVB and Signature exposed gaps in how regulators measure risk.
“One clear takeaway from recent events is that heavy reliance on uninsured deposits creates liquidity risks which might be extremely difficult to administer,” the FDIC’s Gruenberg said in his written testimony. “Particularly in today’s environment where money can flow out of institutions with incredible speed in response to news amplified through social media channels.”
