Sky Blog
Silicon Valley Bank’s failure exposed many familiar weaknesses: uninsured deposits, interest-rate risk, a concentrated depositor base, and weak interest-rate hedging. But the more revealing lesson lies one layer deeper. The supervisory failure was not simply that regulators missed red flags …
Following the 2007-08 Global Financial Crisis, regulators around the world sought to design a new framework that would result in “bail-ins” instead of “bailouts” of large financial institutions. One important tool in that framework was a debt-equity hybrid instrument: contingent …
“Too big to fail” became a household phrase during the 2007–08 Global Financial Crisis. When giant financial institutions teetered, the government reached for ad hoc bailouts, fearing contagion and a broader economic collapse. Congress responded with the Dodd-Frank Act, which …
In a new paper, I discuss whether mandatory central clearing of single-name credit default swaps (CDS) should be adopted in the United States and Europe — an issue with important consequences for financial stability in both regions.
CDS are financial …
We argue that bank regulation and supervision interfere with pricing risk by creating opacity. Given that market disclosures enhance the efforts of supervisors, and vice versa, more disclosure could enhance financial stability (see Spatt, 2010)[1]. In addition, we …
The rapid escalation in uninsured deposit runs in March 2023 led to chaotic intervention with potentially severe fiscal implications. The runs spotlighted once again the limit on prudential norms. Since the collapse of SVB, Credit Suisse, and other smaller banks …
In a recent opinion piece in the Washington Post, former FDIC Chair Sheila Bair and leading British bank historian Charles Goodhart argued in favor of the executive compensation clawback provision in the proposed RECOUP Act, which we analyzed …
It has been a year since Silicon Valley Bank failed, and one of the major policy questions that emerged – what to do about deposit insurance? – remains unresolved. Banking is an industry that needs public confidence to function, and …
The runs on Silicon Valley Bank (SVB) and Signature Bank in March 2023 created a “very high” risk of contagion in the U.S. banking system, according to Treasury Department officials. The intervention by banking regulators, using tools approved in response …
The best way out of the bank stability problem revealed by the run on Silicon Valley Bank – but spreading to other banks – may be a new style of prime money market fund (“MMF”) that, unlike existing prime MMFs, …
The sudden collapse of Silicon Valley Bank (SVB) surprised many investors and industry experts, given the bank’s recent accolades and long-standing reputation as one of the best national and regional banks in the U.S.[1]Moreover, there had been no …