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Stocks on Friday were mixed as investors look to cap a topsy-turvy week with a rush of earnings from big tech giants like Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), and Amazon (AMZN) holding investor attention.
Through Thursday’s close, the S&P 500 and Dow Jones Industrial Average were roughly flat for the week, while the Nasdaq’s surge on Thursday put the tech index higher by about 0.5% for the week.
Stocks opened lower on Friday before reversing higher. But reports that First Republic (FRC) will likely become the fourth US bank to fail since the beginning of March pushed markets back towards the flatline in late morning trade.
Fed report on SVB blames bank execs, Fed officials, regulations for failure
The Federal Reserve on Friday published its highly-anticipated report breaking down what it saw as the causes of Silicon Valley Bank’s failure last month. The central bank placed blame for the debacle on its own staff, bank execs, and regulatory changes in recent years.
“The report shows that Silicon Valley Bank was a highly vulnerable firm in ways that both its board of directors and senior management did not fully appreciate,” the Fed wrote.
“These vulnerabilities—foundational and widespread managerial weaknesses, a highly concentrated business model, and a reliance on uninsured deposits—left Silicon Valley Bank acutely exposed to the specific combination of rising interest rates and slowing activity in the technology sector that materialized in 2022 and early 2023.”
The report also recommended additional regulatory rules should be put in place, including tougher capital and liquidity standards for mid-sized banks, tougher executive compensation standards as well as changes to how the Fed tests for a lender’s management of interest-rate risk, Yahoo Finance’s David Hollerith and Ben Werschkul reported.
“SVB’s failure had two stages,” the report said.
“First, its core risk-management capacity failed to keep up with rapid asset growth, which led to steady deterioration of its financial condition in 2022 and into March 2023. This reflected a long build-up of weakness, as [Silicon Valley Bank] could not effectively manage through a changing economic and financial environment in 2022 and 2023.
“Second, SVBFG failed to develop sufficient contingent funding capacity. This contributed to a disorderly failure when SVBFG tried to manage the acute situation after its March 8, 2023, balance sheet restructuring announcement.”
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