Read time: 3 min.

{{First Name | My friend}},

When I wrote the issue on Silicon Valley Bank a few weeks ago, I knew it might spark some conversation. And honestly, I welcome that.

I know that we all view situations through different lenses. Those lenses are shaped by many things: education, professional training, lived experience, and more. So I wasn't surprised when some of the perspectives I heard focused on the regulatory failure. Those include the 2018 deregulation, the warning signs the Fed appeared to ignore, and the questions about supervisory culture.

I get why people view the collapse through that lens. My goal is to add to those perspectives, not replace them. So let’s take a look at what was happening in the regulatory space. I want to expand the frame a bit by sharing what the documented record reveals about the structural conditions operating inside the Fed itself.

It grabbed my attention, and I believe it will grab yours too.

The Barr Report, which is the Federal Reserve's own self-critical review of its supervision of SVB, documented that supervisors identified interest rate risk deficiencies across three consecutive years of examinations without issuing supervisory findings. The report goes on to describe the supervisory approach as "too deliberative and focused on the continued accumulation of supporting evidence in a consensus-driven environment."

When I read "continued accumulation of supporting evidence" and "consensus-driven environment," my antenna immediately went up. Why? Because these terms are red flags for the absence of decision architecture.

What the details reveal is more specific: the concerns were identified, but the escalation path that should have translated them into meaningful action wasn’t functioning.

The GAO's 2024 report explained why. Essentially, the path existed on paper, but it lacked the specific criteria that would have ensured that it functioned. The Fed's procedures for moving from a lower-level concern to an enforcement action often didn’t include clear and measurable thresholds for when escalation should occur.

The GAO also found the Federal Reserve had still not finalized a rule required by law since 2012 to promote early escalation of supervisory concerns. Translation: the regulatory bodies responsible for catching these escalation failures were operating with the same gaps.¹

The same structural vulnerability that I showed shaped outcomes inside SVB's executive team was present inside the regulatory body responsible for catching it. The absence of clearly defined rules for when escalation should occur governed what got elevated and what didn't, in both organizations simultaneously.

That’s not a coincidence. It's what happens when the structural conditions for challenge, escalation, and revisit are not defined with sufficient precision at the leadership level. There is a distinction between decision architecture built at the executive team level and procedures on paper designed for layers below the C-suite.

That distinction matters because it shapes where the solution lives.

External oversight focuses on the execution of procedures. The documented record in this case suggests it did not reach the structural conditions within SVB's decision architecture. Equally important, the regulatory body and the institution it was supervising were operating with the same gap. That gap is addressed from within, at the level where decisions are owned and carried, not from outside.

Bottom line: whether you're looking at what happened inside SVB's executive team or inside the regulatory body that was supposed to catch it, the documented record points to the same place: the decision layer. The structural conditions for escalation were not sufficiently defined at the leadership level. That is where the work begins, regardless of the context.

Until Next Sunday,

Shawnette Rochelle, MBA, PCC
Founder, Excellence Unbounded
Executive Decision Systems That Drive Organizational Momentum

If you’re curious to learn more about my work with executive teams, you can find it here.

If you want to have a conversation to learn more, schedule it here.