Federal Reserve Vice Chair for Supervision Michelle Bowman said Friday that she has received preliminary findings from Starling Trust Sciences, the firm she hired to review the 2023 Silicon Valley Bank failure, and that the early results support her call for new reporting practices among Fed supervisors. The report has not been released to the public, but Bowman described its contents in a morning speech, saying it outlines issues of supervisory culture and escalation within the central bank.
Bowman said the report found that supervisors in the Fed system feel "personally safer to take no action unless they were certain the action was exactly right," a disposition she described as a "long-standing culture of risk aversion." She said the report also found no connection between the failure and former Vice Chair Randal Quarles, who stepped down in October 2021, before SVB's vulnerabilities became most apparent in 2022. The report further refuted claims that social media drove the bank run, citing analysis by Charles River Associates that found 96% of social media chatter about the run appeared after SVB's failure was inevitable.
The findings support Bowman's proposal for new reporting practices that would identify supervisory issues where examiners were uncertain about whether the standard for action was met or whether action might conflict with leadership expectations. She said this would empower examiners to escalate concerns without fear and give leadership real-time visibility into where teams need clearer guidance. Starling founder Stephen J. Scott said the report is the first of three rounds of fact findings due by early next year, with conclusions and recommendations to come in later phases.
Bowman did not release the full text of the report, which runs hundreds of pages with additional appendices, and did not commit to making it public. Scott said he was not authorized to release the report without the Fed's permission but described Bowman's summary as "very fair." It remains unknown what specific policy changes the Fed will adopt or whether later phases of the review will produce findings that differ from the preliminary narrative.