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GAO-24-106957 1 (2024-03-08)

handle is hein.gao/gaoqda0001 and id is 1 raw text is: Why This Matters Between March 10 and May 1, 2023, state banking supervisors closed Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank and named the Federal Deposit Insurance Corporation (FDIC) as receiver. The three failed banks had borrowed substantial secured loans from their respective Federal Home Loan Banks (FHLBank) before their failures. The FHLBanks are government-sponsored enterprises that support liquidity by making loans (known as advances) to member financial institutions and promote housing and community development. The FHLBank System includes 11 separate federally chartered banks. SVB and First Republic Bank were members of the FHLBank of San Francisco (FHLBSF), and Signature Bank was a member of the FHLBank of New York (FHLBNY). We were asked to review the role of the FHLBanks with regard to the recent bank failures. This report provides information on the FHLBanks' funding to the failed banks, their communication and coordination with FDIC and the Federal Reserve System (the failed banks' primary federal regulators), and repayment of the failed banks' outstanding advances. This report is one in a series of reports about the bank failures.1 We plan to follow this report with work on broader issues related to the FHLBanks. Key Takeaways SVB, Signature Bank, and First Republic Bank each held substantially more FHLBank advances (as a proportion of their total assets) than a group of 16 commercial bank peers as of year-end 2022. The three banks increased their outstanding FHLBank advances by 37 to 50 percent in the first 2 weeks of March 2023, when SVB and Signature Bank failed. First Republic Bank's outstanding advances then largely stabilized until the bank failed on May 1. FHLBNY and FHLBSF reviewed regulators' examination reports for the three failed banks and stated that they met regularly with FDIC, the Federal Reserve Banks, and other regulators before the failures. The two FHLBanks and FDIC communicated about Signature Bank and First Republic Bank as the banks were declining, but SVB failed before FHLBSF requested additional supervisory information from the Federal Reserve Bank of San Francisco. The two FHLBanks relied on established policies, procedures, and agreements with the relevant Federal Reserve Banks to help Signature Bank and First Republic Bank transfer pledges of collateral between the FHLBanks and the Federal Reserve Banks. These efforts allowed the banks to access additional funding. FHLBSF and Federal Reserve Bank of San Francisco officials said SVB failed before the bank could coordinate collateral pledges between FHLBSF and the Federal Reserve Bank. Page 1 GAO-24-106957 Federal Home Loan Banks

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