It also points to the need for stronger standards applied to a broader set of firms, including more stringent stress testing and liquidity requirements, which could include additional capital or liquidity requirements, or limiting share buybacks, dividend payments, or executive compensation.
“The report represents the first step in that process,” said Barr.
He added that the Fed would re-evaluate how it supervises and regulates a bank’s management of interest-rate liquidity risks, and suggested that the Fed should require a broader set of firms to take into account unrealized gains or losses on available-for-sale securities.
The recommendations are likely to face fierce resistance from Republicans in Congress and the banking industry, as they view the report as self-serving, although they agree that attention to liquidity issues is vital. Chair Jerome Powell said he agreed with and supported Barr’s recommendations.
SVB’s failure was the largest in the US in more than a decade, with about $209 billion in assets at the end of last year. Its failure was due to an interest-rate shock in its bond portfolio that led to a destabilizing deposit run.