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GAO-24-106974 1 (2024-03-06)

handle is hein.gao/gaopzg0001 and id is 1 raw text is: Why This Matters Key Takeaways The recent failure of two large U.S. banks may cost the Deposit Insurance Fund about $22.5 billion. State banking supervisors closed Silicon Valley Bank (SVB) and Signature Bank in March 2023 and named the Federal Deposit Insurance Corporation (FDIC) as receiver. As of March 28, 2023, FDIC estimated the cost to the Deposit Insurance Fund of resolving losses at SVB and Signature Bank to be $20 billion and $2.5 billion, respectively. The Deposit Insurance Fund is funded primarily by assessments levied on insured banks and savings associations. It is used to cover all deposit accounts (such as checking and savings) at insured institutions, up to the insurance limit of $250,000 for each account category per depositor at each insured entity. The failures have raised questions from members of Congress and the public about bank supervision. The Board of Governors of the Federal Reserve System (Federal Reserve) and FDIC served as the primary federal regulators for SVB and Signature Bank, respectively. We were asked to examine these regulators' communication and escalation of supervisory concerns in the years before the failures. This report assesses the Federal Reserve's and FDIC's communication of supervisory concerns to SVB and Signature Bank and the sufficiency of the agencies' procedures for escalating such concerns.1 This report also examines adopting noncapital triggers that require early and forceful regulatory actions tied to unsafe banking practices. Federal Reserve and FDIC examination staff generally adhered to their requirements for communicating concerns to SVB and Signature Bank. The Federal Reserve's procedures on when to escalate supervisory concerns often were not clear or specific. The procedures often did not include measurable criteria for examiners to use when recommending informal or formal enforcement actions. This lack of specificity could have contributed to delays in taking more forceful action against SVB. Better procedures could promote more timely enforcement action to address deteriorating conditions at banks in the future. We recommend that the Federal Reserve revise its escalation procedures to be clearer and more specific and to include measurable criteria. In August 2023, FDIC updated its procedures for escalating supervisory concerns. The new procedures require FDIC examiners to consider escalating supervisory concerns that are repeated or uncorrected at the end of an examination cycle. FDIC intends to further update its procedures to expect examiners to require, instead of consider, escalation in these situations. Page 1 GAO-24- 106974 Page 1 GAO-24-106974

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