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

March 13, 2023 . 8:49 PM

1 min read

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.