- SVB's regulators -- the Federal Reserve and California regulators -- seemingly did nothing about a massive unhedged portfolio of long-term Treasuries.
- The bank's top managers were permitted to sell their shares two weeks ago, just before a bungled attempt at capital raising.
- Fragmented regulatory structure and politics led to low capital and liquidity standards for banks like SVB.
- Investors and regulators have been trained to fight the last war: credit and liquidity risks, not interest rate risks.
- Basel regulatory framework assigns a zero risk weighting to government bonds.
SVB shows the perils of regulators fighting the last war
Silicon Valley Bank's regulators did nothing while the bank was sitting on a massive, unhedged portfolio of long-term Treasuries. Politics and fragmented regulatory structure led to low capital and liquidity standards for banks. Investors have been trained to fight the last war: credit and liquidity