Senate Committee on Banking to Hold Hearings on SVB Collapse: ‘Hold Those Responsible Accountable’

Sen. Sherrod Brown (D-Ohio) delivers remarks during a hearing on Russian sanctions on Capitol Hill in Washington, on Sept. 20, 2022. (Kevin Dietsch/Getty Images)

The Senate Committee on Banking, Housing and Urban Affairs said it would hold hearings next week on the collapse of Silicon Valley Bank (SVB) and Signature Bank earlier this month.

Senate Banking Committee chairman Sherrod Brown (D-Ohio) announced on March 21 the first of several hearings on the latest banking crisis and promised to hold those responsible for situation “accountable.”

“It is critical that we get to the bottom of how Silicon Valley Bank and Signature Bank collapsed so that we can maintain a strong banking system, protect Americans’ hard-earned money, and hold those responsible accountable, including the CEOs,” said Brown in a press release on the Senate committee website.

“The American public deserves answers, which is why I am calling on our financial regulators to testify before the Banking and Housing Committee at a hearing on March 28. My job is oversight, and we need to begin these hearings to understand these bank failures and next steps to make sure this never happens again,” he said.

SVB was the nation’s sixteenth-largest bank before it collapsed on March 10, after depositors panicked in a bank run and withdrew money out of fear over the bank’s declining health.

This was soon followed by the failure of the New York-based Signature Bank on March 12; both collapses were the second- and third-largest bank failures in U.S. history, respectively.

A few days later, on March 16, the San Francisco-based First Republic Bank accepted a $30 billion emergency bail out in liquidity raised by 11 of the biggest U.S. banks to prevent a similar collapse.

By March 20, shares of First Republic fell a further 47 percent, with its stock price reaching an all-time low.

In Europe, on March 19, Swiss bank Credit Suisse was absorbed by its larger rival, UBS, after the Swiss government order a takeover to prevent a run in a similar crisis on the Continent.

Biden Administration Calls for Tougher Penalties on Failed Bank Executives

Under severe pressure to prevent further damage to the U.S. financial system, the Biden administration said it was determined to restore the public’s trust in the banks by working to make sure that their deposits were protected.

Federal regulators said all depositors at both banks, including those holding uninsured funds, which include those exceeding $250,000, would be protected by federal deposit insurance.

The first hearing will host Martin Gruenberg, chair of the Federal Deposit Insurance Corporation (FDIC); Michael Barr, vice chair of supervision at the Federal Reserve; and Nellie Liang, undersecretary for domestic finance at the Treasury Department, according to Brown’s statement.

Last week, Brown promised to hold banking and Silicon Valley executives accountable after the White House called for new accountability measures for executives of failed major banks.

President Joe Biden asked that Congress strengthen the rules on regional banks and impose tougher penalties on the executives of failed banks.

Senate Committee Banking Chair Calls for Tougher Regulations to Prevent Further Bank Failures

“We need stronger rules to rein in risky behavior and catch incompetence,” said Brown in a statement.

“Our job on our committee is oversight, and we will be looking at all the ways we can protect working families’ money from risky bets that didn’t pay off in Silicon Valley or on Wall Street.

“That includes holding accountable the executives who ran this bank into the ground and the regulators tasked with overseeing them, and it includes working to reform our laws to better protect workers, small businesses, and taxpayers from corporate greed,” he said.

Brown also sent a letter to the Treasury, the FDIC, and the Federal Reserve, requesting a full review of the Silicon Valley Bank collapse and strengthen the guardrails to prevent a similar crisis.

The senator called for the financial regulators to consider the magnitude of the banks’ uninsured deposits and the role that social media had in causing customers to pull out their money, or if it had accelerated the failures.

He said that the authorities need to identify and close regulatory gaps, shortfalls, or failures by state or federal regulators which “contributed to the banks’ failures, including with respect to capital, liquidity, stress testing, concentration risk, and risk management.”

Brown said that all executive bonuses and compensation be revoked for those responsible for the bank failures and that other appropriate regulatory actions be taken to hold them accountable.

“Finally, you must strengthen the guardrails for banks to prevent failures and mitigate contagion and panic risks to protect consumers and small businesses and to preserve small banks and credit unions on Main Street,” he added.

The Justice Department and Securities and Exchange Commission have also launched investigations into the collapse of the two U.S. regional banks.