Silicon Valley Bank collapse focuses attention on regulation of financial services

MLex Market Insight

News

4.9 • 9 Ratings

🗓️ 17 March 2023

⏱️ 15 minutes

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Summary

Last week’s collapse of Silicon Valley Bank and Signature Bank has again focused world attention on the health of US-based lenders and the regulatory framework in which they operate. The US government stepped in to protect deposits, as investors rushed to withdraw their funds — Silicon Valley Bank suffered a $42 billion run in a single day. However, attention in now turning to whether more stringent regulation could have detected the problems sooner. Meanwhile, the Bank of England moved swiftly to stabilize Silicon Valley Bank’s UK unit — a move that suggests the BOE’s resolution powers are working as they should.

Transcript

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0:00.0	The biggest bank collapsed since the 2008 financial crisis.
0:14.0	It shut down today.
0:16.0	It's called Silicon Valley Bank, and it is one of the tech industry's largest lenders.
0:20.0	In the banking world, the FDIC just reported the California regulator shut down Silicon Valley Bank and it is one of the tech industry's largest lenders. In the banking world, the FDIC just reported the California regulator shut down Silicon
0:23.9	Valley Bank, a big lender out in California after reporting a loss of over $1 billion.
0:29.1	There were fears.
0:30.1	The ripple effects from the collapse of Silicon Valley Bank on Friday are being felt across
0:34.6	the world.
0:35.6	The US government's now said it will ensure all S-FB account holders
0:39.7	will be able to retrieve any funds they have when they start their day to day.
0:44.7	Yes, that's the flavour of today's MLEX podcast, the collapse of Silicon Valley Bank and Signature Bank.
0:50.8	What does it mean for the banking industry in the US? What are the regulatory measures likely to
0:55.7	follow? And how is this reverberating in the city of London? We're going to cover all of those
1:00.7	issues today with the assistance of our team of reporters around the world. I'm your host,
1:05.8	James Panicki, coming to you from the LexisNexis offices in Melbourne, Australia. And the story has been bubbling
1:12.0	away for a week now, so you'll be familiar with the basics. The collapse of Silicon Valley Bank,
1:17.3	SVB, is the second largest bank failure in US history. The bank had invested in long-term treasury
1:23.9	bonds. The value of those bonds decreased as interest rates started to rise,
1:28.7	the bank sold the bonds at a loss, and a bank run followed. A very similar story over on the
1:34.4	East Coast with signature bank, which was unable to protect its assets and its investors,
1:40.2	including many crypto firms, stood to lose big money. What followed was in some ways unsurprising.
1:46.4	The Biden administration intervened, although it was very careful to emphasize that it wasn't a bailout,
	...

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