A new report by the consulting firm Starling Advisory Group has found that Federal Reserve staff 'knew, or should have known,' about Silicon Valley Bank's vulnerabilities prior to its collapse in March 2023, according to Fed Vice Chair for Supervision Michelle Bowman [1]. The report, released the same week the Fed voted to raise interest rates for the first time since 2023, highlights that 94 percent of Silicon Valley Bank's deposits were uninsured and heavily concentrated in venture capital–backed technology companies [1]. This concentration made the bank particularly susceptible to a run, which occurred after the bank announced a $1.8 billion loss from securities sales and a need to raise more capital [1].
Following the bank run, the heads of the Fed, the Federal Deposit Insurance Corporation, and the Treasury Department issued a joint statement guaranteeing all deposits at Silicon Valley Bank, including those above the FDIC's $250,000 insurance limit, to protect tech startups and venture capital firms that were among the bank's primary customers [1]. The Starling Advisory Group's review goes further than a previous internal review led by then-Vice Chair for Supervision Michael Barr in April 2023, which had found the Fed's staff were overcautious in their response to the crisis [1]. The new report asserts that supervisors had sufficient information to recognize the risks in advance [1].
Michael Barr stepped down from his supervisory role in February 2025, allowing President Donald Trump to appoint Michelle Bowman as the new top regulator for the Fed, a position she was confirmed for by the Senate [1]. The findings of the Starling report are expected to raise new questions about Barr's role in the crisis, although Bowman did not mention him by name in her remarks [1]. Some analysts believe the report could prompt President Trump to attempt to remove Barr from his governorship, but the White House did not immediately respond to requests for comment [1].
The release of the report and the Fed's recent interest rate hike have significant implications for regulatory oversight and the stability of the banking sector, especially regarding the management of uninsured deposits and risk concentration in financial institutions [1].
CONCLUSION
The Starling Advisory Group's report sharply criticizes the Federal Reserve's oversight leading up to Silicon Valley Bank's collapse, highlighting missed warning signs and regulatory shortcomings. With new leadership at the Fed and renewed scrutiny on past supervisory actions, the findings are likely to drive further debate over regulatory reforms and accountability in the banking sector.