Banking Crisis 2023 Lessons
About Banking Crisis 2023 Lessons
The 2023 banking crisis, which saw the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank, revealed several lessons. First, the Federal Resures regulatory rollback in 2018 had weakened oversight of mid sized banks. SVB was exempted from stress tests that might have caught its interest rate risk. Second, social media and mobile banking accelerated bank runs. SVB lost 42 billion in one day, faster than any previous bank run. Third, unrealized losses on bond portfolios were a systemic vulnerability. Fourth, the FDIC insurance limit of 250,000 was inadequate for businesses with large payrolls. The crisis prompted proposals to raise or eliminate the deposit insurance limit and strengthen mid size bank regulation.
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