The collapse of SVB: A mix of poor risk management and regulatory failure

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The collapse of Silicon Valley Bank (SVB) – which served 50 % of the tech and life sciences start-ups in the US – is the largest institutional failure since the global financial crisis. It is a classic case study that should (if not already) be taught to economic students on how not to manage a bank and cause a bank run.

It has exposed the inadequacy of the bank’s risk management practices, the (in)effectiveness of some of the post-2008 regulatory reforms, and the (delayed) responsiveness of the authorities. It has also highlighted the significant differences between the US and the EU, in the structure of the banking sector, regulation and supervision.

For Europe, the fall of SVB should be a wake-up call to advance its two pillar projects, the Banking Union and the Capital Markets Union.

Apostolos Thomadakis, Ph.D., is Research Fellow at ECMI and CEPS.

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