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30 05, 2023

M053023

2023-05-30T09:32:01-04:00May 30th, 2023|6- Client Memo|

How to Short-Circuit a Social-Media Run

Was the social media run Silicon Valley Bank’s kiss of death?  Its former CEO says so.  Regulators agree because the more the failure came from the great beyond, the less material their manifold supervisory mistakes.  But, while it’s true that managerial malfeasance and supervisory forbearance played a huge role in recent failures, social-media herds can still trample a bank flatter than a morning croissant.  FedFin outlined solutions shortly after the mid-March failures, but we didn’t then know what we also know now about investor runs.  This memo reviews the runs, updates the regulatory responses, and shows why new liquidity buffers – surely the least controversial of any pending proposal – are urgently needed before the next round of regional bank stress.

m053023.pdf

29 03, 2023

REFORM218

2023-03-29T17:27:51-04:00March 29th, 2023|5- Client Report|

HFSC Focuses on Supervision, Clawbacks, Process, New Resolution and Run-Risk Options

Today’s HFSC hearing on recent bank failures was more partisan than yesterday’s Senate Banking session (see Client Report REFORM217).  Still, there were significant areas of agreement evidenced not only through the marathon hearing, but also at its end, when Chairman McHenry (R-NC) and Ranking Member Waters (D-CA) agreed that they are frustrated with the regulators’ testimony, want more supervisory accountability, and will demand reforms once promised internal investigations are concluded.  Several new issues were brought out today, including why the FedWire closing times precluded liquidity support that might have sustained SVB liquidity, whether TLAC should be required at banks of all sizes, tactics to quell viral runs, and whether tough new rules will cover mid-sized banks and/or community institutions.

REFORM218.pdf

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