Why It Matters

Shareholders lost more than $29 billion in investments in two banks that failed in spring 2023 and operated without a holding company between the end of 2022 and May 2023. A Government Accountability Office (GAO) report was published and publicly released on Sept. 3, 2026, and was addressed to the House Financial Services Committee.

The Big Picture

GAO reviewed 2021 and 2022 disclosures for the three banks that failed in spring 2023; all three banks described setting thresholds for interest rate and liquidity risk management, but never disclosed when those thresholds were breached or how breaches were addressed.

The Securities Exchange Act of 1934 and federal regulations require public companies to disclose information about business risks and financial results. Yet for public banks without holding companies, Congress charged banking regulators with certain functions and duties that would normally fall to the U.S. Securities and Exchange Commission (SEC). Banking regulators' review processes, unlike the SEC's, do not assess disclosures for investors' benefit. They focus on safety and soundness of the banking system itself, not on whether shareholders have the information they need to make informed decisions.

SEC identified other banks whose disclosures on interest rate and liquidity risk topics could be improved. SEC staff have not provided public guidance on how companies should assess whether breaches of interest rate or liquidity risk tolerances are material to investors.

Broader Context

The accounting firms that audit public companies must register with the Public Company Accounting Oversight Board (PCAOB), an entity Congress created in 2002 to focus on audit quality.

The GAO issued two key recommendations: Congress should consider reassessing the authority for reviewing annual financial disclosures for public banks without holding companies; andthe SEC should provide guidance to help companies assess the materiality of information related to interest rate and liquidity risks.

The SEC disagreed with the second recommendation. The GAO has maintained that the SEC should implement the recommendation anyway.

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