Having been a regulator during the great recession and placed one of the largest New York based financial guarantee companies into partial receivership I would say to everyone relax. The collapse of SVB and Signature Bank are not a harbinger of another banking crisis. However, it will trigger a regulatory response over the coming months.
The federal government Sunday exercised the tools it has providing both insured and uninsured depositors at the 2 banks access to their deposits. This coverage is important to keep some of businesses running who rely on the banks for payroll and liquidity. The coverage of uninsured depositors does raise the question of rewarding bad behavior of these 2 banks while other banking institutions hedged in an increasing interest rate environment.
There will be a flurry of activity in Washington surrounding the demise of SVB and Signature Bank. It’s unclear whether tougher reporting requirements would have made a difference for SVB. I would say it’s a foregone conclusion that the Fed will try to toughen liquidity requirements on regional banks overall.
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