The Fed blamed failures on mismanagement and supervisory failures, compounded by a dose of social media frenzy.
following a run on deposits triggered by liquidity concerns. To meet capital requirements, the bank was forced to sell long-dated Treasury notes at a loss incurred as rising interest rates ate into principal value.
"[T]he combination of social media, a highly networked and concentrated depositor base, and technology may have fundamentally changed the speed of bank runs,' he said in the report. "Social media enabled depositors to instantly spread concerns about a bank run, and technology enabled immediate withdrawals of funding."
"I agree with and support his recommendations to address our rules and supervisory practices, and I am confident they will lead to a stronger and more resilient banking system," Powell said. Senior Fed officials said changes to the Dodd-Frank reforms helped spur the crisis, though they also acknowledge that the SVB case also was a failure of supervision. A change approved in 2018 reduced the stringency of stress testing for banks with less than $250 billion, a category in which SVB fell.
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