March 16, 2023
American Banker recently published an article featuring Mark Williams, Master Lecturer of Finance, discussing the role supervisors played in the recent downfall of Silicon Valley Bank, and whether they are to blame for the events.
A concern arose when Silicon Valley Bank quickly became vulnerable to interest rates and created balance sheets around unreliable deposits, resulting in concerns about how supervisors could allow this to happen. Many argue that it is unlikely that supervisors were blind to the issues on the balance sheets, but the steps that followed this realization remain unknown. Banks often receive warnings from Fed examiners within their reviews, but these can take time to process.
Mark adds that, “What sped up this whole problem, of course, was that we had an incredibly aggressive depositor run.”
While Silicon Bank was previously seen as well capitalized and managed, there are now debates whether changes to bank regulations guidelines are necessary.