London: Fed Vice Chair Michelle W. Bowman announced an independent review showing supervisory staff knew about Silicon Valley Bank's vulnerabilities but failed to act due to a culture of risk aversion. He said on Friday that an independent review revealed severe flaws in the central bank's supervisory process regarding the collapse of Silicon Valley Bank (SVB).

According to Anadolu Agency, Bowman shared the initial findings of the Starling Advisory Group's report during a luncheon at the Mansion House in London. The vice chair noted that the report marked a pivotal moment in understanding the failures within the Fed's oversight mechanisms.

SVB collapsed in March 2023 due to unrealized accounting losses, a 94% uninsured deposit base, and a lack of operational readiness. The review showed that supervisory staff recognized these vulnerabilities as early as March 2022 but delayed prompt action. Bowman stated that a long-standing culture of risk aversion caused the supervisory inaction.

Staff members believed taking no action was safer than risking an incorrect supervisory decision. The report also debunked claims that social media platforms triggered the bank run. Analysts found that 96% of social media chatter occurred only after the failure of the bank became inevitable.

The Federal Reserve issued a new set of operating principles to prioritize significant threats and combat the culture of risk aversion. The central bank also required examination teams to submit monthly reports directly to supervisors to escalate concerns without fear.