Federal Reserve Supervision


This section reviews the Federal Reserve's supervisory activities from 2017 through the period of most rapid growth for SVBFG, and the firm's transition from the regional banking organization (RBO) portfolio to the large and foreign banking organization (LFBO) portfolio. The assessment focuses on the primary contributors to the failure of SVB: governance and risk management, liquidity risk, and interest rate risk and investment portfolio management. The scope is not a comprehensive review of all supervisory activity. For example, there was substantial supervisory activity during this period in areas like information technology (IT) that is not a focus of this review.

This report highlights issues supervisors found, how the Federal Reserve addressed those issues with SVBFG management, and the supervisory actions that were taken. This report also highlights issues that should have been detected by the examiners and other actions that could have or should have been taken.

Over this period, supervisors opened and closed a steady stream of supervisory findings in the form of MRAs and MRIAs (figure 11), and SVBFG ended 2022 with 31 open supervisory findings (see table 2). From 2019, the Federal Reserve issued 54 supervisory findings to SVBFG.

Figure 11. SVBFG/SVB number of supervisory issues (MRAs/MRIAs)
Figure 11. SVBFG/SVB number of supervisory issues (MRAs/MRIAs)

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Note: Key identifies series in order from top to bottom. Displays the number of supervisory issues that were opened or closed for SVB or SVBFG, as well as the number that were active at year-end and on March 10, 2023, when SVB was closed. Does not include four consumer compliance issues.

Source: Internal Federal Reserve supervisory databases.

Table 2. Open supervisory issues (MRAs/MRIAs) at SVBFG/SVB, by category and date opened
Date opened Category Issue
Capital planning and positions
8/17/2021 MRA Governance process for lending procedures
8/17/2021 MRA Loan risk rating granularity
8/19/2022 MRA Allowance for credit loss (ACL) stress methodology
Liquidity risk management and positions
11/2/2021 MRIA Enhanced liquidity risk management project plan*
11/2/2021 MRIA Weak risk management and audit oversight of liquidity*
11/2/2021 MRA Contingency funding plan
11/2/2021 MRA Deposit segmentation
11/2/2021 MRA Internal liquidity stress testing design
11/2/2021 MRA Liquidity limits framework
Governance and controls
6/5/2019 MRA Systems/technology second line of defense
6/3/2020 MRIA Vulnerability remediation*
6/3/2020 MRA Identity access management
2/11/2021 MRIA IT asset management*
2/11/2021 MRIA Vendor management*
2/11/2021 MRA Data governance
2/11/2021 MRA Data protection
5/31/2022 MRIA Board effectiveness*
5/31/2022 MRIA Internal audit effectiveness*
5/31/2022 MRIA Risk-management program*
10/7/2022 MRIA Identity and access management governance and oversight*
10/7/2022 MRIA Privileged access management (PAM)*
10/7/2022 MRA Identity access management lifecycle
10/7/2022 MRA Identity access management logging, monitoring, and detection
11/15/2022 MRA Interest rate risk (IRR) simulation and modeling
11/21/2022 MRA Trust and fiduciary services (T&FS) oversight and risk management
12/21/2022 MRIA Gramm–Leach–Bliley Act 501(b) information security program*
12/21/2022 MRA Cybersecurity risk assessment
12/21/2022 MRA Systems development/deployment methodology and practices
1/31/2023 MRIA Third-party risk management governance and risk identification*
Bank Secrecy Act/Anti-Money Laundering
6/24/2022 MRA Oversight of compliance monitoring and testing
6/24/2022 MRA Sanctions country of interest risk management

Note: Supervisory issues include MRAs and MRIAs are noted with an *. List includes supervisory issues open as of March 10, 2023, for both SVB and SVBFG. "Date opened" indicates the date the issue was communicated to the firm. Does not include four open consumer compliance issues.

Source: Internal Federal Reserve supervisory databases.

The timing to close a supervisory finding varies considerably based on the specific issues being addressed and the necessary time to remediate them (figure 12).

Figure 12. Timeline of SVBFG/SVB supervisory issues (MRAs/MRIAs)
Figure 12. Timeline of SVBFG/SVB supervisory issues (MRAs/MRIAs)

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Note: Includes MRAs and MRIAs opened from 2017 to 2023 on SVB and SVBFG. Does not include issues opened prior to 2017 or consumer compliance issues. Issue status reflects the status of each supervisory issue when the firm was closed on March 10, 2023.

Source: Internal Federal Reserve supervisory databases.

Supervisory Portfolio Structure and Supervisory Activities

Supervisory Portfolio Structure

The Federal Reserve categorizes supervised firms into portfolios for which supervisory activities are scaled to a firm's risks, size, complexity, and business activities and the regulatory requirements applicable to a given firm. This report focuses on two of those portfolios:

  • Regional banking organizations (RBOs): U.S. firms with total assets between $10 billion and $100 billion
  • Large and foreign banking organizations (LFBOs): U.S. firms with total assets of $100 billion or more and all foreign banking organizations (FBOs) operating in the U.S. regardless of size48

RBO supervision focuses on the ability of firms within the portfolio to operate in a safe and sound manner and meet the needs of the consumers and businesses in their communities and regions. RBO supervision is delegated to the Reserve Banks, with oversight from the Board. For each supervised firm, Reserve Banks designate a member of supervisory staff as a central point of contact (CPC), who is responsible for supervision of the firm. RBO supervision combines continuous monitoring and firm-specific, point-in-time exams.

For the RBO portfolio, the frequency and intensity of continuous monitoring and institution-specific exams is set in part through the Bank Exams Tailored to Risk (BETR) program, designed to leverage data and surveillance to reduce staffing and burden on firms deemed low risk and to enhance supervision of high-risk firms.49 RBO supervision includes the regional banking organization management group (RBOMG). The RBOMG is a Federal Reserve System committee designed to foster communication across Reserve Banks to promote consistent and effective implementation of supervisory policies and assessments.

LFBO supervision is also delegated to the Reserve Banks but with greater Board staff involvement on substantive topics than in RBO supervision. Reserve Banks select CPCs and assign dedicated supervisory teams (DSTs) who are responsible for supervision of firms in their respective Districts. The supervisory plans for LFBO firms are based on portfolio-wide LFBO Management Group (LFBOMG) principles.

LFBO supervision combines continuous monitoring, firm-specific examinations, and horizontal target examinations. Horizontal exams use the same examination scope across multiple firms, allowing for a comparison of risks and risk-management practices. Additionally, the LFBOMG discusses supervisory ratings across firms in the portfolio at least annually. While discussed with the LFBOMG, supervisory ratings decisions are technically the responsibility of Reserve Banks. In practice, ratings are agreed on by both the individual Reserve Bank and Board staff. The same Board staff are involved in Reserve Bank oversight evaluations discussed in the next section.

While there are some similarities in the supervision of RBOs and LFBOs, there are also important differences. Supervision of large firms, including SVBFG since 2021, focuses on enhancing the resiliency of a firm to lower the probability of its failure or inability to serve as a financial intermediary and to reduce the impact of its failure on the broader financial system.50 The largest institutions are subject to enhanced prudential standards (EPS) as a result of their size or complexity and, in some cases, their systemic importance. Continuous monitoring is a more important supervisory activity for LFBOs.

In July 2018, the Board raised the threshold for heightened supervision by the LFBO portfolio from $50 billion to $100 billion to track the new EGRRCPA thresholds. This delayed application of heightened supervisory expectations to SVBFG by at least three years.

Reserve Bank Oversight

Within the Board, the Divisions of Supervision and Regulation (Board S&R) and Consumer and Community Affairs (DCCA) assess the effectiveness of the Reserve Banks' execution of supervisory authority delegated under the Federal Reserve Act. The Federal Reserve Act requires the Board to "at least once each year, order an examination of each Federal Reserve Bank."51 Annually, Board S&R staff, jointly with DCCA staff, provide annual assessment letters with respect to supervision to the Reserve Bank presidents. The Reserve Bank annual assessment letters provide performance ratings for the Safety and Soundness and Consumer Compliance supervision programs as well as individual supervision portfolio and supporting function ratings. Possible ratings include "Strong," "Effective," "Marginally Effective," and "Requires Improvement."

Since 2019, the ratings issued by Board S&R and DCCA to FRBSF with respect to its RBO and LFBO supervision programs were all "Strong" or "Effective" (table 3). Note that the 2018 ratings were done under a different framework. For the combined safety-and-soundness rating, FRBSF received a "Strong" rating in 2018.

Table 3. Ratings issued to FRBSF by Board staff for FRBSF's supervisory program
Year RBO
supervisory program
supervisory program
2022 Effective Strong
2021 Strong Effective
2020 Strong Effective
2019 Effective Effective
2018 Safety-and-soundness program rating: Strong

Note: The ratings in bold are the years when supervision of SVBFG was considered in the ratings issued. Prior to 2019, Board staff did not communicate individual portfolio ratings; rather, it provided a safety-and-soundness program rating that included all portfolios.

Source: Internal Federal Reserve oversight materials.

In 2022, Board S&R staff noted, with respect to the SVBFG transition, that supervisory planning had been effective and necessarily agile as the dedicated supervisory team had focused the supervisory plans on key knowledge gaps, primarily risk management, board effectiveness, and internal audit. Board S&R staff also noted that the DST demonstrated superior ability and that the SVBFG transition from RBO to LFBO had required the team and FRB leadership to navigate a complex supervisory profile.

Regional Banking Organization (RBO) Supervision

Board S&R staff maintain the Commercial Bank Examination Manual.52 which outlines examination objectives and procedures for examiners to follow in evaluating the safety and soundness and compliance with banking laws of state member banks. Additionally, the Federal Reserve Board has issued supervisory guidance letters applicable to regional banks that examiners use to assess firm risks, including financial, operational, legal and compliance risks as well as risk management. Much of the relevant guidance for regional firms today was developed following the Global Financial Crisis and the Dodd-Frank Act, as modified in 2018 by EGRRCPA and in 2019 by the Board's tailoring rule and related rulemakings.53

According to Board procedures for the RBO portfolio, the supervisory plan should demonstrate that the supervisory concerns identified through the risk assessment process and the deficiencies noted in previous examination or inspection activities are, or will be, addressed. The plan should also identify financial and managerial strengths and emerging risks. Supervision is then tailored to reflect the levels of risk present and minimize regulatory burden for the bank. The BETR model provides guidance on allocation of examination hours so that resources spent on low-risk firms can be limited, shifting regulatory attention and Federal Reserve examiner resources to high-risk firms.54

CPCs schedule risk-based reviews to cover unique risks of a firm. Continuous monitoring activities include regular meetings with institution senior management, analysis of key internal management reports and other internal and external information, leveraging control functions (i.e., internal audit, internal loan review, and other risk-management functions), and coordination with other regulators. Any supervisory activity can result in changes to supervisory ratings and the issuance of supervisory findings, such as MRAs and MRIAs. Annually, the Federal Reserve assigns supervisory ratings to RBO institutions according to the RFI rating system.

Large and Foreign Banking Organization (LFBO) Supervision

LFBO supervisory teams are expected to develop and maintain supervisory plans that are current and tailored to a firm's changing risks and issues, as modified by EGRRCPA in 2018, the Board's 2019 tailoring rule, and related rulemakings, including accounting for the activities of other primary and functional supervisors in which they are participating. LFBO supervisory plans include horizontal examinations, allowing for comparison of practices across multiple firms in the portfolio. Annual horizontal examinations include the horizontal capital review (HCR), horizontal liquidity review (HLR), and the horizontal cybersecurity review, which inform the capital, liquidity, and governance and control ratings. Supervisory plans are expected to be updated to reflect changes in a firm's activities. These changes are informed by the DST's continuous monitoring activities.

Annually, the Federal Reserve rates LFBO holding companies according to the LFI rating system.55 It is an evaluation of whether a firm possesses sufficient financial and operational strength and resilience to maintain safe-and-sound operations and comply with laws and regulations.

Under the LFI rating system, a firm must be rated "Broadly Meets Expectations" or "Conditionally Meets Expectations" for each of the three components (capital planning and positions, liquidity risk management and positions, and governance and controls) to be considered "well managed" in accordance with various statutes and regulations. A firm is considered to be in "satisfactory" condition if all component ratings are either "Broadly Meets Expectations" or "Conditionally Meets Expectations."

One distinctive component of large bank supervision is a focus on continuous monitoring events, which are activities that occur on a regular (e.g., weekly, monthly, or quarterly) or ad hoc basis throughout the supervisory cycle and include meetings with management, reviews of firm-provided management information systems (MIS) and risk reports, analyses of public and confidential supervisory information, and meetings with other supervisors.56 Continuous monitoring is included in the overall supervisory plan. The objective of continuous monitoring is to gather and analyze information to develop and maintain a current understanding of the organization and its risk profile and to monitor changes in risk-management practices, control functions, and business strategies. Monitoring also allows for early signals on risk that can be acted on or escalated. Often, information gleaned from monitoring activities results in the DST adjusting or clarifying scope objectives for upcoming reviews or making other changes to the supervisory plan.


Federal banking regulators, including the Federal Reserve System, use a number of different rating systems for different types of financial institutions. For the assessment of SVBFG and SVB, this report focuses on the three most relevant. Each includes a specific set of components and a numeric scale to provide comparisons across similar financial firms (table 4).

Table 4. Supervisory ratings systems
Rating system Applicable entity Ratings and components Scale
Holding companies
LFI rating system—Large financial institution rating system
  • Bank holding companies (BHCs) and certain saving and loan holding companies (SLHCs) with total consolidated assets > $100 billion
  • U.S. intermediate holding companies (IHCs) of foreign banking organizations (FBO) with total consolidated assets > $50 billion
Three components:
  • Capital planning & positions
  • Liquidity risk management & positions
  • Governance & controls
Each LFI component is rated on a four-point, non-numeric scale. There are no composite or subcomponent ratings.
  • Broadly Meets Expectations (BME)
  • Conditionally Meets Expectations (CME)
  • Deficient - 1 (D-1)
  • Deficient - 2 (D-2)
RFI rating system
  • BHCs and certain SLHCs with total consolidated assets < $100 billion
  • For noncomplex holding companies with assets at or below $3 billion, only the R and C components are applied. (See SR letter 13-21.)
Three component ratings (RFI), a composite rating (C), and a depository institution (D) component rating. Under the RFI components are subcomponent ratings. The composite rating is not an arithmetic average.
Example: RFI/C (D)
  • Risk management:
    • Board and senior management oversight
    • Policies, procedures, and limits
    • Risk monitoring and management information systems
    • Internal controls, including internal audit
  • Financial condition:
    • Capital adequacy
    • Asset quality
    • Earnings
    • Liquidity
  • Impact to insured depositories from nonbank subsidiaries
  • All component and subcomponent ratings (except I) are rated on a five-point numeric scale:
    • 1 – Strong
    • 2 – Satisfactory
    • 3 – Fair
    • 4 – Marginal
    • 5 – Unsatisfactory
  • I component:
    • 1 – Low likelihood of significant negative impact
    • 2 – Limited…
    • 3 – Moderate…
    • 4 – Considerable…
    • 5 – High…
Insured depository institutions/banks
CAMELS rating system—Uniform financial institutions rating system used by the Federal Financial Institutions Examination Council (FFIEC) agencies.
  • All insured depository institutions
Banks are rated on each of the following components, and composite ratings for safety and soundness and risk management. The composite rating is not an arithmetic average.
Example: CAMELS/C (Risk Management)
  • Capital adequacy
  • Asset quality
  • Management
  • Earnings
  • Liquidity
  • Sensitivity to market risk
Each of the components and composites is rated on a 1 to 5 scale:
  • 1 – Strong
  • 2 – Satisfactory
  • 3 – Less than satisfactory
  • 4 – Deficient
  • 5 – Critically deficient
  • CAMELS ratings system applies to insured depository institutions (IDIs), including SVB.
  • RFI ratings system applies to holding companies with total consolidated assets below $100 billion, including SVBFG until 2021.
  • Large financial institution (LFI) rating system applies to holding companies with total consolidated assets above $100 billion, including SVBFG from 2021.
Transition of SVBFG from Regional Banking Organization (RBO) Supervision to Large and Foreign Banking Organization (LFBO) Supervision

Based on the Board's 2019 tailoring rule, SVBFG shifted into the LFBO portfolio in February 2021 as the firm crossed the $100 billion threshold, which meant that the firm shifted from the lower-intensity supervision of the RBO program to the heightened standards of LFBO supervision.

The transition of SVB from the RBO portfolio to the LFBO portfolio lacked a defined plan and process. As a result, supervisory plans and staffing of the new team came after the transition, rather than in the period leading up to it. Staff describe a sharp shift and "cliff effect" as SVBFG rapidly went from RBO supervision to LFBO supervision, requiring building of a new supervisory team, implementation of horizontal examination processes, establishment of more intense continuous monitoring routines, and phasing in of EPS.

SVBFG moved into the LFBO portfolio because of extraordinary growth over a short period of time. As detailed in subsequent sections, the firm was not prepared for EPS. When SVBFG crossed the threshold, RBO supervisors were in the process of completing their annual ratings cycle. The FRBSF RBO and new LFBO teams staff agreed to a transition period while the RBO team completed ratings and the new LFBO DST was being formed within FRBSF. The understanding was that LFBO would take over supervision of SVB at the end of the RBO supervisory cycle in July 2021.

According to interviews, one reason supervisors did not increase supervisory intensity as SVBFG grew toward the $100 billion threshold is that there was concern from policymakers and senior leadership at the Board that supervisors would "pull forward" the EPS requirements before SVBFG met the threshold. The Board of Governors' implementation of EGRRCPA created stark differences in the RBO and LFBO supervisory programs and constrained the ability to prepare a firm for the transition between the two portfolios.

The accommodative supervisory stance and examination pause during COVID-19 amplified the impact of the transition, resulting in the cancellation of examinations during a period of rapid growth for SVBFG.

Policy Stance

In 2018, the Board confirmed its policy stance on supervisory guidance, issuing "guidance on guidance," which publicly clarified the role of supervisory expectations as compared to laws or regulations.57 In April 2021, the Board adopted a final rule to codify the long-standing principle that supervisory guidance does not have the force and effect of law, but rather outlines expectations and appropriate practices for a particular subject area or activity.58

Over the same period, under the direction of the Vice Chair for Supervision, supervisory practices shifted. In the interviews for this report, staff repeatedly mentioned changes in expectations and practices, including pressure to reduce burden on firms, meet a higher burden of proof for a supervisory conclusion, and demonstrate due process when considering supervisory actions. There was no formal or specific policy that required this, but staff felt a shift in culture and expectations from internal discussions and observed behavior that changed how supervision was executed. As a result, staff approached supervisory messages, particularly supervisory findings and enforcement actions, with a need to accumulate more evidence than in the past, which contributed to delays and, in some cases, led staff not to take action.

It is difficult to judge how these collective changes in policy affected the oversight of SVBFG, but a review of the historical record and staff interviews suggest that they played a role. Although the stated intention of these policy changes was to improve the effectiveness of supervision, the changes also led to slower action by supervisory staff and a reluctance to escalate issues. For example, staff informed SVBFG about a forthcoming MOU around information technology in 2021, but staff subsequently dropped the matter because they felt it would not be pursued by policy­makers at that time.


In 2017, the Federal Reserve System (FRS) adopted a different budget approach for the System's business lines, including Supervision and Regulation (S&R). The budget approach emphasized making trade-offs to align expenditures with strategic objectives, notably by shifting resources toward areas that were viewed as strategic priorities. The addition of resources in the supervision area required the endorsement of Board S&R.

For the Federal Reserve System as a whole, resources did not grow with the banking industry (figure 13). From 2016 to 2022, banking sector assets grew 37 percent (nominal terms), while FRS supervision headcount declined by 3 percent. This contrasts with the period after the Global Financial Crisis in 2008–09 when the Federal Reserve made fundamental changes to its supervision program to enhance effectiveness and consistency, including steady growth of staffing from 2009 through 2016.

Figure 13. Supervision staffing relative to banking industry assets
Figure 13. Supervision staffing relative to banking industry assets

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Note: All values indexed to 100 in 2008. The positions shown combine different staffing statistics for the Federal Reserve Banks and the Board of Governors of the Federal Reserve System. Reserve Bank numbers presented include the average number of personnel (ANP) or full-time equivalents (FTE) conducting supervision and regulation functions, including consumer compliance. They are a proxy for staffing levels but do not reflect actual positions. Board numbers presented include filled positions in the Division of Supervision and Regulation, excluding consumer compliance. Banking industry assets include all top-holder firms.

Source: Internal Federal Reserve staffing databases, FR Y-9C, and Call Report.

It is difficult to quantify the impact of this shift, but supervisory coverage of SVBFG declined while SVBFG was in the RBO portfolio. For SVBFG in particular, supervision resources declined despite the firm's rapid growth and increased risk (figure 14). In the 2017 to 2019 period, supervisory hours were declining at the same time the firm was experiencing rapid growth. In 2020, decreased supervision hours reflect the impact of the COVID-19 pandemic. This is also the period when there was some pressure to reduce burden on firms under $100 billion. Hours dedicated to SVBFG did not increase until it moved into the LFBO portfolio, at which point hours increased dramatically.

Figure 14. SVBFG supervision hours relative to assets
Figure 14. SVBFG supervision hours relative to assets

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Note: The key identifies bars in order from left to right. All values indexed to 100 in 2017. SVBFG supervision hours reflect actual hours spent on scheduled supervisory activities of SVBFG.

Source: Internal Federal Reserve staff time databases and FR Y-9C.

Supervisors approached SVBFG differently as it grew and moved from the RBO to the LFBO portfolio. Consistent with the differing supervisory approach associated with each portfolio, the composition of supervisory activity conducted with respect to SVBFG shifted away from mandatory target exams and toward continuous monitoring in 2022 (figure 15).

Figure 15. Actual hours spent on scheduled supervisory activities of SVBFG
Figure 15. Actual hours spent on scheduled supervisory activities of SVBFG

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Note: The key identifies bars in order from top to bottom.

Source: Internal Federal Reserve staff time databases.

When SVBFG transitioned to the LFBO portfolio, FRBSF requested 12 additional staff in March 2021 for a total of 20 FTE resources. This request for additional resources reflected the size and complexity of SVBFG. The request was approved by Board staff in June 2021. As of December 2022, the DST was staffed with 15 full-time employees. On the financial resilience team, there were five dedicated staff. Nonetheless, SVBFG received fewer supervisory resources through 2021 relative to peer institutions (figure 16).

Figure 16. Supervision resources for SVBFG compared with peer institutions
Figure 16. Supervision resources for SVBFG compared with peer institutions

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Source: Internal Federal Reserve staff time databases.

Overview of Supervisory Views

When SVBFG moved into the LFBO portfolio in 2021, staff initially focused on examinations covering key areas affected by the upcoming requirements of EPS, then pivoted to an examination of broader governance and risk management. Initial exams and post-transition meetings indicated to the team that risk management and controls had not kept pace with the growth of SVBFG.


For SVBFG, the holding company, supervisors rated all components in the RFI rating system as "Satisfactory-2" for every year from 2017 to 2021. When SVBFG moved to the LFBO portfolio, supervisors rated it as "Broadly Meets Expectations" for Capital, "Conditionally Meets Expectations" for Liquidity, and "Deficient-1" for Governance and Controls under the LFI ratings system (table 5).

Table 5. RFI and LFI ratings for SVBFG
Report disposition date RFI rating LFI rating
Impact rating Composite
6/14/17 2 2 2 2 2      
6/13/18 2 2 2 2 2      
4/11/19 2 2 2 2 2      
5/8/20 2 2 2 2 2      
7/9/21 2 2 2 2 2      
8/17/22           BME* CME* D-1*
10/11/22           BME    

* indicates a change in ratings or ratings system.

Source: Internal Federal Reserve supervisory databases.

For SVB, the subsidiary bank, supervisors rated all components except liquidity as "Satisfactory-2" from 2017 to 2021. Liquidity was rated "Strong-1" from 2017 to 2021. After SVB moved to the LFBO portfolio, supervisors downgraded the management and composite ratings to "Less than Satisfactory-3" and the liquidity to "Satisfactory-2" (table 6).

Table 6. CAMELS ratings for SVB
Report disposition date Capital rating Asset quality rating Management
Earnings rating Liquidity rating Sensitivity to market risk
3/7/17 2 2 2 2 1 2 2
2/14/18 2 2 2 2 1 2 2
3/6/19 2 2 2 2 1 2 2
4/13/20 2 2 2 2 1 2 2
5/3/21 2 2 2 2 1 2 2
8/17/22 2 2 3* 2 2* 2 3*

* indicates a change in ratings.

Source: Internal Federal Reserve supervisory databases.

Exam Timing

The Federal Reserve completed a large number of core exams for both SVB and SVBFG in the years prior to the failure of SVBFG (figure 17). This figure covers all safety-and-soundness exams mailed on or after January 1, 2017, that resulted in ratings as well as examinations in the areas of liquidity, interest-rate risk, governance, and risk management.

Figure 17. Timeline of supervisory activities
Figure 17. Timeline of supervisory activities

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Note: This figure shows all safety-and-soundness exams mailed on or after 1/1/2017 that resulted in ratings, as well as examinations in the areas of liquidity, interest rate risk, governance, and risk management.

CAMELS examinations of SVB: These examinations focused on evaluating and rating capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. Risk management and composite ratings are also issued in CAMELS examinations. These exams were conducted with CDFPI.

Holding company inspections of SVBFG: Inspections that assessed the organization's overall risk management and consolidated financial condition, resulting in an RFI or LFI rating.

Source: Internal Federal Reserve supervisory databases.

Shortly after transitioning into LFBO supervision, capital and liquidity "readiness review" examinations were conducted to assess compliance with current expectations and preparation for the application of EPS. Note that these occurred after SVBFG had transitioned into the LFBO portfolio. These included

  • Capital planning target exam: Baseline assessment of stress testing and capital planning capabilities against applicable expectations included in SR letter 12-759 and SR letter 12-1760 to inform the LFI Capital rating. The November 9, 2021, supervisory letter conveyed that capital planning practices met applicable supervisory guidance.61 Additionally, management's planned enhancements to the capital plan structure aligned with the mandatory elements described in the Capital Plan Rule.62
  • Liquidity planning target exam: Baseline assessment of liquidity planning and stress testing capabilities against applicable expectations in SR letter 10-663 and SR letter 12-7 to inform the LFI Liquidity rating. The review focused on liquidity risk management practices separate from SVBFG's on-balance sheet liquidity positions. The November 2, 2021, supervisory letter conveyed that SVBFG's liquidity risk management practices were below supervisory expectations set forth in applicable guidance.64

The first, and perhaps the most critical, examination in 2022 was of governance and risk management. The examination resulted in three MRIAs identifying material weaknesses in the board of directors, risk management, and internal audit. The examination of internal audit in late 2022 provided additional confirmation that SVBFG struggled in this area.

  • Governance and risk-management target exam: 65 SVBFG's governance and risk-management practices were found to be below supervisory expectations in May 2022. The firm's board had not provided effective oversight to ensure senior management implemented risk-management practices commensurate with the firm's size and complexity. Previously identified supervisory findings plus the material weaknesses identified in liquidity risk management indicated weaknesses in SVBFG's ability to self-identify internal control weaknesses and manage risks proactively. Supervisors found SVBFG's internal audit department had also not provided appropriate coverage of SVBFG's LFI readiness initiatives or independent risk function.
  • Internal audit (IA) target exam: 66 The FRBSF and CDFPI completed a joint target exam of SVBFG/SVB's Internal Audit Program in October 2022. SVBFG/SVB's internal audit function was deemed not fully effective. The overall assessment was driven by material weaknesses in the risk-assessment process, the process to define the IA audit universe, IA's continuous monitoring, and audit execution.

The issuing of the ratings was delayed for the 2021 supervisory cycle to allow for the governance and risk-management examination to occur. As a result, the supervisory ratings letter, which was based on supervisory work performed over the course of 2021 and the first half of 2022, was jointly issued by the FRBSF and CDFPI on August 17, 2022.67 The letter formally communicated the ratings that had been presented to SVBFG's board on July 21, 2022, and represented the first set of LFI ratings issued to SVBFG. The letter conveyed the following ratings to SVBFG: Governance and Controls (G&C): "Deficient–1"; Liquidity (L): "Conditionally Meets Expectations"; Capital (C): "Broadly Meets Expectations."

The delay until August 2022 in issuing the 2021 supervisory ratings illustrates how the normal supervisory practices did not keep up with SVBFG's rapid expansion. The 2020 supervisory ratings had been communicated to SVB in May 2021. SVB's CAMELS Composite rating was a "Satisfactory-2,"its management rating was a "Satisfactory-2," and the RFI composite rating for SVBFG was also a "Satisfactory-2." The LFI team started vetting the 2021 LFI ratings in the October and November 2021 timeframe. Given the significant weaknesses identified during the liquidity examination and during continuous monitoring, the team considered rating Governance and Controls "Deficient-1." However, the DST, LFBOMG, Board staff, and Reserve Bank staff decided supervisors had not yet established the necessary support for such a downgrade given that only a few months had passed since the previous supervisory team had rated SVBFG as "Satisfactory-2" on a composite basis.

A broad view across the interviews was that the decision to postpone the initial ratings in 2021 or consider a downgrade was part of a shift that the burden of proof was on supervisors rather than firms, due process considerations that had been articulated by policymakers for several years, and reluctance to overturn a recent rating.

Memorandum of Understanding (MOU)

When any one of the three LFI ratings (Governance and Controls, Liquidity, or Capital) is rated "Deficient-1," there is a rebuttable presumption that an informal enforcement action will be undertaken. An MOU is an informal enforcement action. Shortly after the issuance of the August 2022 supervisory letter, FRBSF and CDFPI planned to develop and issue an MOU. The MOU provisions would have reflected concerns noted in the 2022 Governance and Risk Management and 2021 Liquidity exams. The MOU was still in draft form and was in process of being submitted to the CDFPI for another round of review when SVB failed. The MOU drafting process involves stakeholders across all agencies, including FRBSF, Board S&R, Board Legal, and CDFPI, and can be time consuming to complete. The SVBFG MOU was also delayed as stakeholders considered whether upcoming examinations would contribute to the content of the draft MOU.

Continuous Monitoring

One notable output of continuous monitoring was a SVBFG "recession readiness" memorandum written by the DST and provided to senior leadership at the FRBSF and the Board staff on December 1, 2022.68 The memo discussed SVBFG's key exposures related to liquidity, credit, and operational risks and preparations for a possible recession. The memo conveyed that SVBFG's liquidity presented the greatest exposure in a recession. For year-to-date 2022, SVBFG had already incurred $49 billion of net client outflows, or 12.5 percent of total client balances. The magnitude of these outflows prompted SVBFG management to activate certain aspects of its contingency funding plan.

In the short term, a higher cost of funds represented the most direct impact. The longer-term impact was noted to be material charges against earnings if SVBFG was forced to liquidate its securities portfolio to fund unexpected net deposit outflows. SVBFG's liquidity buffer to fund deposit outflows was comprised of cash reserves and U.S. government and agency investment securities. However, the prevailing interest rate environment had resulted in material unrealized losses in SVB's securities portfolio.


SVBFG was supervised as a regional banking organization for over 20 years by the Federal Reserve. Supervision of SVBFG proved inadequate to deal with the firm's unique business model and the rapid growth over the last four years. Supervisors recognized a gradual increase in liquidity and market risks, but they did not fully appreciate the risks associated with the concentrated deposit base or SVBFG's investment portfolio strategy.

These shortcomings likely reflect a range of factors. Resources for SVBFG seem to have been insufficient, which may reflect reallocation to face other demands (e.g., growth in the overall banking system or emerging risks like cybersecurity or fintech). Staffing of exams while SVBFG was in the RBO portfolio generally came from the community/regional bank pool of examiners, who may have lacked experience with governance and risk-management practices of more sizable and complex institutions like SVBFG. Finally, the transition from the RBO to the LFBO portfolio led to sizable cliff effects from the shifts in supervisory approaches and applicable regulation. This contributed to delays in assessments and allowed time to pass as LFBO supervisors built their understanding of SVBFG even as SVBFG's financial condition deteriorated. The COVID-19 examination pause and a shift in policy stance after 2018 added to the impact.

As a final observation, the evolution of supervision in the LFBO portfolio involves a structure where Board staff both participates in the supervisory process with the Reserve Bank and provides formal oversight. This creates a potential conflict that may lead Reserve Bank staff to defer to Board staff with oversight responsibilities.




 48. The eight U.S. global systemically important banks are supervised in the Large Institution Supervision Coordinating Committee (LISCC). Return to text

 49. Board of Governors of the Federal Reserve System, "Bank Exams Tailored to Risk (BETR)," SR letter 19-9 (June 3, 2019), https://www.federalreserve.gov/supervisionreg/srletters/sr1909.htm. Return to text

 50. Board of Governors of the Federal Reserve System, "Consolidated Supervision Framework for Large Financial Institutions," SR letter 12-17/CA letter 12-14 (December 17, 2012), https://www.federalreserve.gov/supervisionreg/srletters/sr1217.htmReturn to text

 51. 12 U.S.C. § 485. Return to text

 52. Board of Governors of the Federal Reserve System, Commercial Bank Examination Manual, https://www.federalreserve.gov/publications/supervision_cbem.htmReturn to text

 53. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). Economic Growth, Regulatory Relief, and Consumer Protection Act, Pub. L. No. 115-174, 132 Stat. 1296, 1356, § 401(a) (2018) (codified at 12 U.S.C. § 5365). Return to text

 54. SR letter 19-9. Return to text

 55. SR letter 19-3. Return to text

 56. MIS reports may contain confidential business information, which is generally not available to the public. Return to text

 57. SR letter 18-5. Return to text

 58. Role of Supervisory Guidance, 86 Fed. Reg. 18,173 (April 8, 2021), https://www.federalregister.gov/documents/2021/04/08/2021-07146/role-of-supervisory-guidanceReturn to text

 59. Board of Governors of the Federal Reserve System, "Supervisory Guidance on Stress Testing for Banking Organizations with More Than $10 Billion in Total Consolidated Assets," SR letter 12-7 (May 14, 2012), https://www.federalreserve.gov/supervisionreg/srletters/sr1207.htmReturn to text

 60. Board of Governors of the Federal Reserve System, "Consolidated Supervision Framework for Large Financial Institutions, SR letter 12-17 (December 17, 2012), https://www.federalreserve.gov/supervisionreg/srletters/sr1217.htmReturn to text

 61. SVBFG Capital Planning Target Supervisory letter, November 9, 2021. Return to text

 62. 12 C.F.R. § 225.8. Return to text

 63. Board of Governors of the Federal Reserve System, "Interagency Policy Statement on Funding and Liquidity Risk Management," SR letter 10-6 (March 17, 2010), https://www.federalreserve.gov/boarddocs/srletters/2010/sr1006.htmReturn to text

 64. SVBFG Liquidity Planning Target Supervisory letter, November 2, 2021. Return to text

 65. SVBFG and SVB Governance and Risk Management Target Supervisory letter, May 31, 2022. Return to text

 66. SVBFG and SVB Internal Audit Target Supervisory letter, December 27, 2022. Return to text

 67. SVBFG and SVB 2021 Supervisory Ratings letter, August 17, 2022. Return to text

 68. Memorandum re Recession Readiness – Silicon Valley Bank, December 1, 2022. The memorandum was provided to the Deputy Director of the Division of Supervision and Regulation at the Board of Governors, FRBSF Head of Supervision, FRBSF SVP of Large Financial Institution Supervision, and FRBSF VP of LFBOs. Return to text

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Last Update: May 18, 2023