Short Takes – 3-13-23 – SVB Bank Edition

SVB’s tech failings were a problem long before the bank run that led to its demise, critics say. CNBC.com article. Pull quote: “But long-time clients and others with intimate knowledge of how SVB operated say the bank did itself no favors. Between the bank’s refusal to upgrade its technology to meet the demands of modern-day businesses and its treatment of many startup customers, SVB’s problems extended beyond its risk profile and a challenging economy.”

Regulators Face Urgent Task to Stem Spread From Silicon Valley Bank. WSJ.com article. Pull quote: “Mr. Rosengren [president of the Federal Reserve Bank of Boston from 2007 to 2021] said the fallout could be particularly disruptive because of how heavily concentrated the lender was in venture capital and the technology sector. Any ultimate resolution by regulators could have further reaching implications not only for venture-capital firms, but also for endowments and pension funds that have been increasing their exposure to venture capital, he said.”

Wall Street Braces for the Next Silicon Valley Bank. WSJ.com article. Pull quote: “The Fed has been focused on controlling inflation, but the events of last week led officials to think about another of the central bank’s core mandates: financial stability. As of Thursday, weeks of hot economic data had suggested that the Fed might raise rates by 0.5 percentage point at its meeting later this month and continue to tighten policy until 2024. On Friday, traders revised wagers to bet on a lower peak for interest rates and a rate cut later this year.”

How Silicon Valley Turned on Silicon Valley Bank. WSJ.com article. Pull quote: “Social media, which hadn’t been a factor during the last banking crisis, pinged both fact and fiction around the world at lightning speed. Spooked customers whipped out their phones and opened their banking apps. With a few taps and swipes, their money was on its way.”

US regulators say SVB customers will be made whole as second bank fails. CNN.com article. Pull quote: “In a joint statement Sunday, Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Federal Deposit Insurance Corporation Chairman Martin J. Gruenberg said the FDIC will make SVB and Signature’s customers whole. By guaranteeing all deposits – even the uninsured money that customers kept with the failed banks – the government aimed to prevent more bank runs and to help companies that deposited large sums with the banks to continue to make payroll and fund their operations.”