Fed raised concerns about Silicon Valley Bank's risk management three years ... trends now

The Fed raised concerns about questionable risk management practices at Silicon Valley Bank four years before its meltdown this month, according to a report.

The central bank slapped SVB with a warning in January 2019, according to a presentation circulated to employees last year which has been seen by The Wall Street Journal.

The newly-uncovered correspondence beginning in January 2019 were and were laid bare in a presentation circulated last year to employees of SVB’s venture-capital arm, SVB Capital.

The official order, known as a Matter Requiring Attention, stopped short of any enforcement requirement but put the bank on notice that the Fed was concerned about its risk management systems - particularly its portfolio of securities and its focus on venture-capital and tech startups.

Fallout from the firm's collapse is still being felt by regional firms such as First Republic, with JPMorgan CEO Jamie Dimon among those leading discussions to stabilize the bank amid a sudden rush of withdrawals. 

The news, first reported by The Wall Street Journal, indicates that regulators had been wise to practices being blamed for the bank's blowup for years, and comes as particularly troubling due to the Federal Reserve's responsibility to vet such concerns to make sure each issue is addressed.

The Journal reportedly viewed a presentation containing these warnings, but said it was not clear whether they were ever enforced. The publication added that that a Central Bank review of the alleged oversight is due in May.

SVB - which had been nation's 16th-largest bank prior to its collapse - did not immediately return a request for comment. 

Similarly, the San Francisco Fed, which was also responsible for overseeing SVB's operations along with its national counterpart, did not immediately respond when reached out.

The Journal piece, meanwhile, did detail some of the other complaints leveled by the Fed following its warning, including one sent to SVB in 2020 that asserted its system to control risk didn’t meet the expectations for a bank with more than $100 billion in assets.

That warning came shortly after the bank’s assets had risen to $114 billon by the end of 2020, from about $70 billion in 2019.

Following that citation, the fast growing firm saw its evaluation nearly double by December 2021 to about $209 billion, Federal Deposit Insurance data shows.

That means that even after receiving both of the Fed's criticisms, SVB was allowed to double in size despite the aforementioned irregularities - with the bank eventually being granted a clean bill of health after a 2022 audit from 'Big-Four' accounting firm KPMG LLP more than a year later.

Around that time, the bank's since axed CEO Greg Becker sold off $3.57million of SVB stock in a pre-planned, automated transaction. That same day, the firm's CFO similarly shilled $575,000 in firm shares.  

Two weeks later, SVB would collapse, with Becker among the first on the chopping block. 

Hours earlier, thousand of uninsured depositors descended on SVB branches in California and Massachusetts to reclaim their deposits, after the bank announced a capital raise and the sale of an massive amount of securities at a loss.

Days later, a second firm, New York-based Signature Bank would also declare bankruptcy  - though the firm's failure, while still posing a threat to the American financial system, can be traced to last year's FTX failure, due to much of the bank's assets being based in cryptocurrency.

The consecutive collapses would then be followed by another crypto-related bank failure involving California-based firm Silvergate, and more recently, major

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