The collapse of Silicon Valley Bank (SVB) set the Federal Deposit Insurance Corporation (FDIC) back only $20 billion while the failure of Signature Bank cost just $2.5 billion, according to prepared remarks by FDIC Chair Martin Gruenberg set to be delivered in front of the Senate Banking Committee on Tuesday, The Hill reported. That’s just a fraction of the $128 billion deposit insurance fund (DIF) the federal bank insurer maintains in the event of bank runs. Such runs have sent shockwaves in recent weeks throughout the global economy and have led to widespread fears about a greater, 2008-style contagion. “Of the estimated loss amounts, approximately 88 percent, or $18 billion, is attributable to the cost of covering uninsured deposits at SVB while approximately two-thirds, or $1.6 billion, is attributable to the cost of covering uninsured deposits at Signature Bank,” Gruenberg’s remarks say.
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In related news, the failure of Silicon Valley Bank demonstrates a “textbook case of mismanagement,” the Federal Reserve’s top banking regulator is expected to tell Senate lawmakers on Tuesday, while acknowledging there may have been shortcomings in the central bank’s oversight, the Wall Street Journal reported. “SVB failed because the bank’s management did not effectively manage its interest rate and liquidity risk, and the bank then suffered a devastating and unexpected run by its uninsured depositors,” said Michael Barr, the Fed’s vice chairman for supervision, in written testimony released by the central bank. Mr. Barr is leading a review of the Fed’s supervision of the firm, which is due by May. He said in the prepared remarks that the central bank is committed to ensuring it “fully accounts for any supervisory or regulatory failings, and that we fully address what went wrong.” He described the broader banking system as “sound and resilient, with strong capital and liquidity.”
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