3 ms·

> No mention of the years-long (and finally "successful") lobbying effort by big banks, to get Congress to let them do far riskier stuff. First, the 2018 Dodd-

by TMWNN 4y ago

> No mention of the years-long (and finally "successful") lobbying effort by big banks, to get Congress to let them do far riskier stuff. First, the 2018 Dodd-Frank modifications did not affect the Big Four banks at all. Second, the 2018 modifications had nothing to do with SVB's collapse. SVB collapsed because it made a bad bet on where interest rates were going (and did not hedge for risk), making it vulnerable to short-term liquidity issues. That has nothing to do with the 2018 raising of the minimum AUM for application of Tier 1 capital requirements from $50 billion to $250 billion. To put it simplistically, Dodd-Frank has to do with solvency. SVB was solvent; it was not liquid.

Marazan 4y ago
It would not have passed a stress test.
- TMWNN 4y ago
  Larry Summers and Dan Tarullo explicitly confirm that SVB would have passed a Fed stress test in 2022. <https://www.youtube.com/watch?v=cYgz4KSRPww#t=5m10s https://www.youtube.com/watch?v=cYgz4KSRPww#t=5m10s>
- TMWNN 4y ago
  The SF Fed's warnings last year were that, warnings; SVB management did not listen (quite possibly because the bank lacked a CRO for most of the year). That's not the same thing as the bank failing an actual, formal stress test. While SVB and Credit Suisse's collapses' causes are directly unrelated, depositor outflows were involved in both, as opposed to fundamental issues with their balance sheets. Credit Suisse's Tier 1 ratio was as good as that of UBS or any other big European bank. <https://www.wsj.com/articles/credit-suisses-death-gives-birth-to-new-type-of-bank-crisis-39bee5b9 https://www.wsj.com/articles/credit-suisses-death-gives-birt...> At the end of the day, a loss of clients' faith in a bank is something that no stress test can directly measure ahead of time. EDIT: SVB's Tier 1 ratio was 12%, among the highest for US regional banks. <https://www.morningstar.com/articles/1144363/which-bank-stocks-are-most-at-risk-of-a-liquidity-crisis https://www.morningstar.com/articles/1144363/which-bank-stoc...>

by TMWNN 4y ago

Marazan 4y ago

It would not have passed a stress test.

TMWNN 4y ago
Larry Summers and Dan Tarullo explicitly confirm that SVB would have passed a Fed stress test in 2022. <https://www.youtube.com/watch?v=cYgz4KSRPww#t=5m10s https://www.youtube.com/watch?v=cYgz4KSRPww#t=5m10s>
TMWNN 4y ago
The SF Fed's warnings last year were that, warnings; SVB management did not listen (quite possibly because the bank lacked a CRO for most of the year). That's not the same thing as the bank failing an actual, formal stress test. While SVB and Credit Suisse's collapses' causes are directly unrelated, depositor outflows were involved in both, as opposed to fundamental issues with their balance sheets. Credit Suisse's Tier 1 ratio was as good as that of UBS or any other big European bank. <https://www.wsj.com/articles/credit-suisses-death-gives-birth-to-new-type-of-bank-crisis-39bee5b9 https://www.wsj.com/articles/credit-suisses-death-gives-birt...> At the end of the day, a loss of clients' faith in a bank is something that no stress test can directly measure ahead of time. EDIT: SVB's Tier 1 ratio was 12%, among the highest for US regional banks. <https://www.morningstar.com/articles/1144363/which-bank-stocks-are-most-at-risk-of-a-liquidity-crisis https://www.morningstar.com/articles/1144363/which-bank-stoc...>