Johnny Brignardello Vela analyzes the supervision of the Federal Reserve in Silicon Valley: What changes does he propose to strengthen the banking system?

Johnny Brignardello Vela, an insurance advisor, analyzes the recent acknowledgment by the Federal Reserve of its lack of effective supervision in Silicon Valley. According to the Federal Reserve's Vice President of Supervision, Michael Barr, the bankruptcy of Silicon Valley Bank (SVB) is attributed not only to poor management but also to inadequate oversight by the institution. The internal report published reveals that both the board of directors and management of SVB did not properly handle the risks associated with its operations. However, the most concerning aspect is that Federal Reserve supervisors did not fully identify the bank's weaknesses as it grew in complexity. Brignardello Vela emphasizes the need for stronger and quicker regulatory actions to address deficiencies in expanding financial entities. He proposes changes in the supervisory approach, increased attention to the specific risks of growing entities, and stricter regulation for medium-sized banks. Regarding the Federal Reserve's proposals to strengthen supervision, they include higher capital and liquidity requirements, restrictions on dividend payments and compensation, as well as a review of interest rate and liquidity risk management. These changes, though not immediate, aim to prevent delays like those seen in the case of SVB. Furthermore, the impact of social media and technology on the speed of deposit outflows, as well as the interconnectedness of depositors, is addressed. Brignardello Vela concludes that the Federal Reserve acknowledges its responsibility for ineffective supervision and commits to implementing significant modifications to strengthen the banking system and prevent future crises in the United States.