Consumer group urges FDIC to publicly release failed-bank probes

Bloomberg News

A consumer advocacy group is calling for regulators to publicly release investigations into executives and directors of the three regional banks that collapsed last year: Silicon Valley Bank, Signature Bank and First Republic Bank. 

Americans for Financial Reform is calling for executives and directors of the failed regional banks to be held accountable through potential fines, penalties and bans for misconduct. AFR sent an emailed solicitation to consumers calling for the Federal Deposit Insurance Corp. to publicly release its findings before the change in administrations. 

"If the Biden administration's FDIC doesn't act by January 19, there's every chance the Trump administration will sweep this under the rug," said Annie Norman, campaign manager for Americans for Financial Reform. "The people responsible haven't faced consequences. That's outrageous."

An FDIC spokesman said that any reports on SVB would have to come from the Federal Reserve, the bank's primary federal regulator. Still, regulators typically do not release reports on bank investigations.

The FDIC's chief risk officer issued reports on the agency's supervision of Signature Bank and First Republic, while the agency's inspector general released material loss reports on the two failed banks. 

The FDIC stopped deposit runs in March 2023 at Silicon Valley Bank and Signature Bank by declaring a so-called systemic risk exception to ensure that uninsured depositors at those failed banks were covered. First Republic Bank collapsed in May and JPMorgan Chase assumed all of the bank's deposits.

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While several post-mortems of the bank failures have been released, Americans for Financial Reform is making a last-ditch effort for probes into misconduct by executives and board members. SVB in particular offered its executives generous compensation packages and paid out bonuses to employees hours before being taken over. 

Separately, the Department of Justice and the Securities and Exchange Commission also have probes into insider sales and disclosures made by the banks about their financial health before they failed.

The FDIC's Deposit Insurance Fund took a massive $31.5 billion-dollar hit for the three failures, which includes coverage of uninsured depositors, losses on assessments and discounts on the purchase prices of the banks. Some industry experts have called into question the FDIC's credibility because the agency initially low-balled the cost of resolving the banks. 

Individual bank executives have not been critical of the FDIC, but bank lobbying groups have questioned the FDIC's decision last year to charge more than 100 large banks a higher-than-expected special assessment to replenish the Deposit Insurance Fund.

Last year the Congressional Research Service described ways in which Congress and the federal government could recoup bonuses and other forms of compensation from former officers and directors at SVB, as well as ways to hold executives personally accountable.

AFR's Norman expressed frustration that after nearly two years, no executives have yet been held accountable, and may never face accountability.

"The collapse of Silicon Valley Bank, Signature Bank and First Republic wasn't just a fluke," Norman said. "It came from high-risk practices, weak oversight and negligence at the highest levels. Yet to this day, the public hasn't seen the findings. We can't let these investigations disappear into bureaucratic limbo."