SF Fed Bank Pres: I Wasn’t ‘Regularly Aware’ of SVB Problems, That’s ‘a Feature’ So We Could Have SVB’s CEO on Board

On Thursday’s broadcast of CNBC’s “Squawk on the Street,” Federal Reserve Bank of San Francisco President and CEO Mary Daly stated that she was “not regularly aware” of the problems with Silicon Valley Bank (SVB) and said that doing this is “a feature of the system” that makes it so that people like former SVB CEO Greg Becker can “sit on our Board and not be concerned that there’s crossover.”

CNBC’s Senior Economics Reporter Steve Liesman asked, “[B]ank presidents are not in charge of the supervision of banks that size. But I do have a couple of questions from the reporting that I’ve done…were you aware of the interest rate — of the flaws in the interest rate model at Silicon Valley Bank, even though you did not have direct supervision over the bank?”

Daly responded, “So, the way supervision works — and it’s a really good opportunity to help your viewers understand how Fed supervision works — it is directed by the Board of Governors. The supervisory framework is in the Board at the Board of Governors and then the Reserve banks, I have teams here in San Francisco, supervision teams, and they report to the Board of Governors. And this keeps me ring-fenced, rightly so, from the day-to-day operations of supervision so that we can have Greg Becker, for instance, sit on our Board and not be concerned that there’s crossover. So, one of the things that the viewers, I think, need to know is that bank presidents don’t have a direct role to play in supervision. And in fact, that’s a feature of the system that prevents conflict of interest and also allows continuity — if you’re a bank in North Dakota, you’re treated the same way as a bank in California. So, that’s the answer to the question. I’m not regularly aware of these things.”

Daly added that there does need to be better communication between Reserve bank heads and supervisors.

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