But a good deal of it lies with those members of Congress and former President Donald Trump’s administration who listened to bank lobbyists and decided that it would be wise to lighten the regulatory and capital burden on so-called smaller banks. Under legislative changes in 2018, banks with assets of less than US$250 billion ($335.6 billion) were exempted from the stricter supervision (including capital and stress testing) to which large banks are subjected. The grounds for doing so — that such banks do not pose systemic risks to the stability of the US financial system — were clearly spurious.
The collapse of Silicon Valley Bank in northern California and Signature Bank in New York are the largest bank busts since 2008. Regional and midsized bank stocks have tanked, and depositors and businesses are worried about who might be next. US President Joe Biden’s administration and the Federal Reserve have duly stepped in to prevent more panic-driven bank runs, and to shore up the broader financial system where needed.
For legislators, regulators, bank boards, and CEOs everywhere, these sudden bank failures are a stark reminder that the work of ensuring a firm’s stability and soundness never ceases. In the case of SVB and Signature Bank, there is plenty of blame to go around.
