Regulators faced the U.S. Senate Banking Committee Tuesday morning in a hearing following the collapse of SVB Financial Group SIVB and Signature Bank SBNY.
What Happened: FDIC chair Martin Gruenberg, the Federal Reserve's Vice Chair for Supervision Michael Barr and the Treasury’s Undersecretary for Domestic Finance Nellie Liang testified in front of Congress Tuesday morning.
The hearing followed the biggest banking collapse since the 2008 financial crisis, which was backstopped by the government in an effort to stabilize the situation and strengthen public confidence in the financial system.
In Gruenberg's opening statement, he stressed this was not a bailout and that banks were allowed to fail because they failed to address risks. The depositors however were made whole and should continue to have confidence in the banking system.
Barr and Liang echoed Gruenberg's comments, noting that the system is sound, has ample liquidity and funds are safe.
In an exchange with lawmakers, Barr said SVB had already been identified as being "not well managed" and "deficient" ahead of the collapse. A bailout was not in the cards, but backstopping depositors was necessary.
Gruenberg explained that if the government hadn't stepped in, regional banks across the country would have been at risk of experiencing bank runs, which Liang noted would have "caused serious problems."
Why It Matters: Earlier this month, U.S. Treasury Secretary Janet Yellen defended the swift actions of the Treasury, Federal Reserve and FDIC in an exchange with the Senate Finance Committee.
"I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them," Yellen said in her opening remarks.
Gruenberg, Barr and Liang continued to reinforce the notion that depositors remain safe in an effort to build back confidence in the banking system.
The Fed is undergoing a self-assessment to determine if it failed in any supervisory roles along the way. A report covering the review is expected to be made public on May 1. It will include "confidential supervisory information," according to Barr.
All three government officials testifying on Tuesday believe that supervision should be strengthened, but they all maintained that the banking system remains strong.
"The goal of the actions that we took are to make sure that we have a thriving and diverse system of banking in the United States including community banks and regional banks that are the lifeblood of many communities all across the country," Barr said.
Read Next: How A $700M Tech VC Firm Was Saved From SVB Collapse, And Why Its CEO Still Banks There
Photo: Katherine Welles via Shutterstock
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