Three years before its epic collapse, highflying Silicon Valley Bank was preparing to join the big boys of the banking world as it neared $100 billion in assets. But SVB needed help to make the leap, the Washington Post reported. “Immediately they decided to hire consultants,” one former SVB employee recalled, speaking on the condition of anonymity to describe internal decision-making. “Plug the gap with consultants.” Among the consultants that SVB turned to was McKinsey & Co., the blue-chip management-consulting group with a global roster of corporate and government clients. McKinsey was hired to identify gaps in SVB’s capital and risk-management programs — a job that might have spotted problems with the bank’s investment strategy long before the bank’s failure. But it didn’t work out that way. McKinsey’s work for SVB in 2020 and 2021 — which has not been previously reported — was sharply criticized by the Federal Reserve in its sweeping report on what caused the second-largest U.S. bank collapse since 2008. The Fed found that McKinsey had “failed to design an effective program” for assessing SVB’s problems and produced a report filled with “weaknesses.” McKinsey was not identified by name in the Fed’s postmortem examination, but a government official familiar with the regulator’s review, who spoke on the condition of anonymity to discuss internal details, confirmed that it was the consulting firm. Two former SVB workers also confirmed that McKinsey had been hired for the work later criticized by the Fed. The revelation comes as McKinsey continues to deal with the fallout from legal settlements over allegations by state and federal authorities regarding its disclosures in clients’ bankruptcy cases and its role in advising Purdue in marketing the painkiller OxyContin.
