Amid the collapse of Silicon Valley Bank (SVB)some analysts affirm that a reversal of the financial regulations of the Government of the former Republican president donald trump may have contributed to the situation.
Though largely unknown outside of California’s Silicon Valley tech corridor, SVB has been a benchmark financial institution for healthcare and technology startups for decades from the country. One of the 20 largest banks in the United Stateshad more than $200 billion in assets at the end of last year, according to CNN.
However, as of Friday, SVB was in free fall when clients began a flight from the institution, driven by higher interest rates and other factors, resulting in a rchain reaction that has threatened to sink the institution and leave their clients in financial jeopardy.
In the aftermath of Friday’s bank run, some reports pointed out that a rollback of banking regulations by Trump could have weakened SVB’s ability to manage risks associated with interest rates.
In 2018according to The New York Times, Trump signed a bill that eliminated regulatory requirements for regional banks with less than $250 billion in assets.
Under the new rules, these institutions no longer had to undergo “stress tests” by the Federal Reserve and that’s it they were not required to keep a certain amount of cash on hand to hedge against the effects of financial shocks, the newspaper reported.
The Times noted in its report that the bill was championed by the SVB CEO Greg Becker. Becker had pressured lawmakers in Congress to reduce regulation subjecting certain banks to greater scrutiny, stating that SVB had a “low risk profile of our activities and business model”.
This Saturday it was also learned that Becker sold his SVB shares two weeks before the collapse on Friday.
By 2018, yesYour bank had spent approximately $500,000 to push for the changes that Trump it eventually became law, according to The Lever, an investigative news outlet.
The rules reversed by the bill were first introduced in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping reform law signed by former President Barack Obama to address problems in the financial sector stemming from the 2007-2008 law. global financial crisis and the Great Recession.
As the businessman and former Obama economic adviser noted in a Saturday tweet, robert wolfthe Dodd-Frank Law originally required banks with more than $50 billion in assets they would submit to stress tests.
Following the run, California regulators shut down SVB and handed over control to the Federal Deposit Insurance Corporation (FDIC). Since then, it was reported that the bank had not hired a chief risk officer in the months leading up to Friday’s collapse and had failed to insure about 90 percent of its deposits.
Source: Ambito
