Republican Rep. Warren Davidson of Ohio has requested that bank regulators investigate whether the run on deposits at Silicon Valley Bank were orchestrated by short sellers seeking to profit from the bank’s failure.
“There could be a coordinated effort by multiple entities to cause bank runs,” Davidson said during a Tuesday hearing before the House Financial Services Committee investigating the regulatory response to recent bank failures.
“The problem here is who led the short and is that in any way correlated to the people that were moving the money out,” Davidson said, adding that he has requested that regulators provide transaction-level data on account withdrawals, but has not received a response.
Michael Barr, the vice chairman for supervision at the Federal Reserve, SVB’s primary federal regulator, said in response to this line of questioning that the central bank doesn’t have access to such data for privacy reasons.
See also: Fed’s Barr warns of rising risk around commercial real estate at regional banks
Federal Deposit Insurance Corp. Chairman Martin Gruenberg said that his agency has “some ability to look at deposit withdrawals and who was responsible for the largest withdrawals that may have contributed to a particular bank failure.”
The Fed was SVB’s primary federal banking regulator, though the FDIC is the back-up supervisor for federally insured banks.
Calls for regulators to step in to halt short selling of regional-bank stocks have grown in recent weeks amid the failures of several large financial institutions, including Silicon Valley Bank, and the sale of First Republic Bank to JPMorgan Chase & Co.
JPM,
Securities and Exchange Commission Chairman Gary Gensler said Wednesday that his agency is not considering a temporary ban on short sales, but that the regulator is monitoring markets for signs of illegal, manipulative activities.
Regional bank stocks
KRE,
have been under pressure in the wake of several high-profile bank failures, though share prices stabilized in recent days.
Read the full article here