Why the Fed Ordered a New Outside Review of the SVB Failure
Federal Reserve Vice Chair for Supervision Michelle Bowman has called for an independent review of the 2023 U.S. bank failures.
The Federal Reserve hosts a page titled 'Independent Review of the 2023 U.S. Bank Failures' Federal Reserve. In testimony, Bowman said the review will objectively examine why supervision, the routine checking of banks by regulators, fell short and will deliver practical findings to strengthen that oversight Federal Reserve.
The new review will be done by outsiders. Bowman decided to hire an external consulting firm to conduct a new review of the 2023 failure of Silicon Valley Bank Senate Banking Committee. That setup is different from the Federal Reserve's earlier internal review of the failure.
Silicon Valley Bank failed in 2023. Its holding company was Silicon Valley Bank Financial Group (SVBFG). The collapse followed a rapid outflow of depositors and set off broader turmoil across banks Reuters.
The Federal Reserve previously published a review examining the failure of Silicon Valley Bank, its holding company, and the oversight provided Federal Reserve. That report blamed changes to regulation and supervision made in recent years Reuters.
Bowman has offered a parallel critique focused on execution and how the bank itself managed risk. In a speech titled 'Modernizing Supervision and Regulation: 2025 and the Path Ahead', she stated that the failure of Silicon Valley Bank exposed critical flaws in the prior supervisory approach Federal Reserve. She has also stated that Silicon Valley Bank's management failed to properly manage contingent liquidity planning — basically, a backup plan for cash if depositors rush to withdraw Federal Reserve. Earlier, in August 2023, she said targeted changes to supervision and regulation were warranted in light of the bank failures earlier in 2023 Federal Reserve.
The broader context here is accountability for the supervisors themselves. An internal review can lay out the exam history and when warnings were raised. It has a harder time judging bigger choices about staffing, priorities, and why slow fixes were tolerated. An outside review can test those choices with more distance.
In my view, readers should take the two stated goals together. Examining why supervision fell short means digging into the process step by step. Delivering practical findings means changing how supervision works day to day. For bank examiners, that usually comes down to what they check, how fast they escalate problems, and whether a bank's emergency cash plan affects its rating and its ability to tap backup funds.
Looking at what this means for policy, the order of questions matters. The earlier review pointed to changes to regulation and supervision made in recent years. The new review points to supervisory execution and management failure on backup cash planning. That shifts the question from whether the rules were too weak to whether supervisors spotted risky reliance on large, quick-to-leave uninsured deposits and forced action in time. The answer will shape expectations for cash-risk checks, closer exams for large regional banks, and how those runnable deposits are treated.
