During a recent hearing by the United States Senate Banking Committee to discuss the regulatory response to recent bank failures, officials from the Federal Deposit Insurance Corporation (FDIC), Federal Reserve, and Treasury testified. FDIC Chair Martin Gruenberg spoke about the causes of the failures of Silicon Valley Bank (SVB) and Signature Bank, which included the role of digital assets and the agency’s responses to the crisis. Gruenberg stated that the bank failures in March were largely attributed to a combination of high levels of uninsured deposits and rapid growth.
Gruenberg cited the closing of Silvergate Bank, which had concentrated its activities in a single sector – venture capital firms – and the bankruptcy of FTX as examples of how traditional banking risks could lead to a bad outcome when not managed adequately. By May 1, the FDIC is expected to publish a comprehensive report on the deposit insurance system, along with a report by the corporation’s chief risk officer on the supervision of Signature Bank. Additionally, the FDIC will issue a proposal on new rulemaking on the special assessment that month. Despite recent events, Gruenberg emphasized that the state of the US financial system remains sound.
