House Financial Services Subcommittees Request Information on Regulators' Supervision of Failed Banks

House Financial Services Subcommittee on Oversight and Investigations Chair Bill Huizenga (R-MI), House Financial Services Subcommittee on Financial Institutions and Monetary Policy Chair Andy Barr (R-KY) and Representative Young Kim (R-CA) requested information from federal and state regulators on their supervisory activities and coordination with other regulators leading up to the collapse of Silicon Valley Bank (“SVB”) and Signature Bank. The legislators asked for the regulators' responses no later than April 6, 2023.

In their letter to Federal Reserve Board ("FRB") Vice Chair for Supervision Michael S. Barr and Federal Reserve Bank of San Francisco (“FRBSF”) CEO and President Mary Daly, the legislators requested, among other things:

• records and communications from the FRB and FRBSF to SVB regarding supervision and its balance sheets;
• formal and informal enforcement actions issued against the SVB;
• commitments or agreements entered into with SVB regarding the acquisition of Boston Private Bank & Trust in 2021;
• the timing of when the FRB and/or FRBSF learned that SVB was the top borrower of the Federal Home Loan Bank of San Francisco (“FHLB SF”) which accounted for 20 percent of FHLB SF’s total outstanding loans;
• confirmation on whether the FRB or FRBSF were aware of the interest rate risks that SVB faced due to the Federal Open Market Committee’s rapid increase in the federal funds rate;
• the method(s) by which the FRB and FRBSF assess a firm’s risk management approach when there is rapid growth;
• confirmation on whether the FRB or FRBSF were aware that SVB had hired Goldman Sachs to assist in the raising of $2.25 billion in additional capital and if so, whether the FRB or FRBSF were concerned given that the firm met “well capitalized” standards as of its call report dated December 31, 2022;
• staffing information concerning (i) the number of FRBSF examiners dedicated to a supervisory team to oversee the SVB, (ii) the number of FRB analysts to cover the SVB and (iii) whether any FRBSF examiners or FRB analysts responsible for covering the SVB were also responsible for assessing related climate risk assessments; and
• how the FRBSF, the FRB and the California Department of Financial Protection & Innovation (“CDFPI”) coordinated supervision and examination of SVB.

In their letter to Financial Stability Oversight Council ("FSOC") Chair Janet L. Yellen, the legislators requested:

• information pertaining to the FSOC meeting on March 12, 2023, including (i) the unredacted minutes, (ii) any and all voting records and (iii) the exact start and finish times;
• information pertaining to the special “leaders” meeting on March 10, 2023 between the FRB, the FDIC and the OCC, including (i) the unredacted minutes and (ii) whether Ms. Yellen convened the meeting within her role as Secretary of the Treasury or FSOC Chair;
• information from the Office of Financial Research (“OFR”), including (i) data indicative of systemic risk factors present on March 10, 2023 and (ii) indicators, such as the Financial Stress Index, which would have shown outsized spikes on any day between March 8, 2023 and March 13, 2023;
• whether any information provided by the OFR was utilized by the FSOC;
• confirmation on whether Ms. Yellen was aware that the New York Department of Financial Services (“NYDFS”) had closed Signature Bank and appointed the FDIC as receiver before the March 12, 2023 FSOC meeting; and
• whether any actions were taken by the FSOC at “other times through the communication of votes member votes to the Secretary of the Council, in writing, and any action” which would have effectively taken the same action as the one taken by holding the meeting on March 12, 2023.

In their letter to NYDFS Superintendent Adrienne A. Harris, the legislators requested:

• communications between (i) the NYDFS and Signature Bank regarding supervisory determinations, such as any ratings downgrades and (ii) the NYDFS and the FDIC specifically regarding risks posed by Signature Bank's balance sheet;
• informal or formal enforcement actions against Signature Bank by the NYDFS;
• the number of NYDFS employees assigned to overseeing examinations of Signature Bank;
• how the NYDFS and the FDIC coordinated supervision and examination of Signature Bank;
• the reason for closing Signature Bank on a Sunday instead of on the close of the business day on Friday, March 10, 2023;
• whether the FRB, FDIC or the Secretary of the Treasury (i) consulted with the NYDFS before making the decision to invoke the systemic risk exception and if so, the details around the date and timing and (ii) communicated to the NYDFS the invoking of the systemic risk exception regarding SVB prior to invoking for Signature Bank;
• confirmation on whether the NYDFS attended the FSOC virtual meeting on Sunday, March 12, 2023; and
• the NYDFS’s involvement in evaluating Flagstar Bank, N.A.’s bid for Signature Bank.

In their letter to CDFPI Commissioner Clothilde V. Hewlett, the legislators requested:

• all records and communications between CDFPI and SVB regarding supervisory determinations, such as any ratings downgrades;
• information or formal enforcement actions against SVB by the CDFPI;
• all commitments or agreements entered into with SVB regarding its acquisition of Boston Private Bank & Trust in 2021, as well as records and communications between the CDFPI, the FRB, and/or the Massachusetts Commissioner of Banks regarding the approval of SVB’s acquisition;
• communications between the CDFPI and the FRB regarding SVB and the risk posed by SVB’s balance sheet;
• the timing of when the CDFPI learned that SVB was the top borrower of FHLB SF and accounted for 20 percent of FHLB SF’s outstanding loans;
• confirmation on whether CDFPI staff were aware of the risks posed to SVB as a result of the Federal Open Market Committee’s rapid increase in the federal funds rate;
• how the CDFPI assess risk management of firms during times of rapid growth and the number of CDFPI staff assigned to supervising and examining SVB;
• how the CDFPI and the FRB coordinated supervision of SVB;
• the decision-making process around when to close SVB; and
• whether the FRB, the FDIC and the Secretary of the Treasury consulted with the CDFPI before the decision to invoke the systemic risk exception.

In their letter to Council of Inspectors General on Financial Oversight (“CIGFO”) Chair Richard Delmar, the legislators requested information regarding:

• whether unredacted minutes of the March 12, 2023 FSOC meeting have been made available to the CIGFO;
• whether CIGFO is aware of (i) the start and finish time of the FSOC meeting and (ii) when the NYDFS took possession of Signature and appointed the FDIC as receiver in relation to the timing of the FSOC meeting;
• whether any actions were taken by the FSOC at “other times through the communication of member votes to the Secretary of the Council, in writing, and any action” which would have effectively taken the same action as the one taken by holding the meeting on March 12, 2023; and
• any record kept by the CIGFO on any and all of the votes taken during the March 12, 2023 FSOC meeting.