An unpublished draft review has concluded that Federal Reserve supervisors repeatedly failed to act on red flags about the deteriorating financial condition of Silicon Valley Bank prior to its 2023 failure, according to Fed Vice Chair for Supervision Michelle Bowman and other individuals briefed on the matter.

The assessment, commissioned by Bowman and prepared by Starling Trust Sciences, represents her long-standing push for an external inquiry into the bank's collapse. Sources say Starling submitted its initial report to the Fed in recent weeks. SVB Financial Group, headquartered in Santa Clara, California, failed in March 2023, marking the second-largest bank collapse in U.S. history at the time.

That failure ignited widespread anxiety about the financial health of major regional lenders and contributed to the subsequent collapses of New York-based Signature Bank and San Francisco's First Republic. According to insiders, the review found that regulators issued 54 formal warnings to the bank between 2020 and 2022, yet most addressed technical, operational risk, or compliance issues rather than demanding reductions in interest rate exposure or lower depositor concentration.

The review reportedly identifies serious shortcomings within the bank's management, but it also highlights that nearly a year before the collapse, Fed examiners either knew or should have known that the institution was highly vulnerable to substantial losses and exposed to the risk of a devastating run. It further states that Fed staff failed to compel adequate measures to mitigate the bank's exposure to rising interest rates, which had triggered paper losses on its assets, and to reduce the threat of deposit outflows from account holders with balances above FDIC insurance limits.

Even though market turmoil eventually subsided after extensive federal intervention, this review shows that regulators are still determining what triggered the run and how the failure should shape policy decisions in Washington. Bowman outlined the report's contents in prepared remarks on Friday, noting that the central bank has not waited for the review to conclude before addressing some of its own deficiencies.

"We are facing this cultural problem directly," Bowman said at an event in London. "The review found that too many staff believed it was personally safer to do nothing rather than risk taking an action that might be wrong." The findings are expected to bolster Bowman's efforts to reform Fed banking supervision, which she believes should concentrate on core financial risks at large institutions.

Some critics, including Senator Elizabeth Warren, worry that the report may be politically motivated, pointing out that the bank's collapse has already been the subject of multiple government examinations. Bowman rejected that notion in her prepared speech. "This review is not about assigning blame," she said. "Instead, it is about learning from the past so we do not repeat it in the future." Warren criticized the review on Friday, calling it an "attempt to rewrite history."

The new findings could complicate the narrative offered by then-Fed Vice Chair for Supervision Michael Barr in April 2023. Barr's internal post-mortem attributed the failure to bank management, rapid growth, and regulatory easing. In response to the latest developments, White House spokesperson Kush Desai said Barr "failed to do his job in the lead-up to this mess and then issued a report widely viewed as political." Desai added that "the American people, investors, and financial markets have every right to expect the Federal Reserve to focus on its core mission, demonstrate competence, and be held accountable."

Barr did not immediately respond to a request for comment. Bowman stated that this external review is "very important for the credibility" of the Fed's bank supervisory work.