Forbes Magazine: How Trump’s Deregulation Sowed The Seeds For Silicon Valley Bank’s Demise

[Mac1958]

How Trump's Deregulation Sowed The Seeds For Silicon Valley Bank's Demise​

Trump's deregulation exempted Silicon Valley Bank from key liquidity requirements.​

Okay, so... If this article is correct, the deregulation DID play a role here:

=============

"Because Trump’s EGRRCPA eliminated important elements of Dodd-Frank’s Title I, Silicon Valley Bank and other banks of that asset size, are not required to calculate and report the Liquidity Coverage Ratio, the Net Stable Funding Ratio, or to conduct comprehensive liquidity assessment reviews.

"The purpose of the Liquidity Coverage Ratio (LCR) is for banks to add up all of their high quality liquid assets such as cash, U.S. treasuries, AAA investment grade fixed income securities, and other cash equivalents. That figure is then divided by net stressed cash outflows; this is the part where banks have to calculate all the ‘what if’ scenarios. This part of the LCR requires banks to simulate what happens when big deposits or a significant number of deposits flee. The LCR also asks banks to calculate what happens to them when large receivables do not come in or how a bank is impacted when its biggest counterparties default. Dividing the numerator by the denominator tells you if a bank is sufficiently liquid in periods of stress. If the result is 100 or preferably much higher, banks should be able to meet their obligations at least for a month even in stressed obligations."

============

So if a bank's internal bond holdings do not have to be totaled based on current NET valuation -- such as when the value of bonds drop as they have -- its balance sheet can be significantly off. That's why Moody's was in the process of downgrading SVB's rating when the shit hit the fan.

I wouldn't be surprised to see that rule changed back now, and I wouldn't be surprised if some kind of interest rate hedging were required.

 

[Nuthin' Fancy]

Okay, so... If this article is correct, the degulation DID play a role here:

=============

"Because Trump’s EGRRCPA eliminated important elements of Dodd-Frank’s Title I, Silicon Valley Bank and other banks of that asset size, are not required to calculate and report the Liquidity Coverage Ratio, the Net Stable Funding Ratio, or to conduct comprehensive liquidity assessment reviews.

"The purpose of the Liquidity Coverage Ratio (LCR) is for banks to add up all of their high quality liquid assets such as cash, U.S. treasuries, AAA investment grade fixed income securities, and other cash equivalents. That figure is then divided by net stressed cash outflows; this is the part where banks have to calculate all the ‘what if’ scenarios. This part of the LCR requires banks to simulate what happens when big deposits or a significant number of deposits flee. The LCR also asks banks to calculate what happens to them when large receivables do not come in or how a bank is impacted when its biggest counterparties default. Dividing the numerator by the denominator tells you if a bank is sufficiently liquid in periods of stress. If the result is 100 or preferably much higher, banks should be able to meet their obligations at least for a month even in stressed obligations."

============

So if a bank's bond holdings do not have to be totaled based on current NET valuation -- such as when the value of bond holdings drop as they have -- its balance sheet can be significantly off.

I wouldn't be surprised to see that rule changed back now, and I wouldn't be surprised if some kind of interest rate hedging were required.

SAME thing as 2007-8 bank speculation, fractional reserve banking and bad timing.

 

[cnm]

I wouldn't be surprised if some kind of interest rate hedging were required.

Which reduces profit and which is why the regs are lobbied against.

 

[Lesh]

HEY, STUPID! In the fucking stock market, ya cannot make money without taking risks.

And you fuckers want us to put our retirement there

 

[Lesh]

SVB was a small bank?

Relatively speaking yes.

 

[ThisIsMe]

It's like we're not supposed to remember the filibuster exists and the majority doesn't rule. Or we're supposed to imagine Republicans will legislate for the good of the US rather than playing games in order to regain power.

It is to laugh.

True, the filibuster might have stopped it.

 

[scruffy]

And you fuckers want us to put out retirement there

That's another thing that separates me from the cons.

I want EE savings bonds. They don't.

 

[LeftofLeft]

In 2018 Trump and the GOP spearheaded the move to deregulate banks (they took major mega campaign donations from these banks including SVB).

A few years later, small bank SVB, goes under because they made risky stupid moves brought on by Trump's policy.

If we had real campaign finance reform then republicans would never win another election and all the major problems in America would be solved (drug prices anybody).

Bernie Sanders says Silicon Valley Bank's failure is the 'direct result' of a Trump-era bank regulation policy

Sanders said a Trump-era bill was to blame for the SVB bank run. The 2018 law rolled back bank regulations and eased rules on most mid-sized banks.

www.businessinsider.com

Biden and the Democrats have been in power for two years. How come they didn’t undo what Trump and the Republicans did on deregulation of banks? They did sweeping regulatory changes in the oil and gas industry within hours of inauguration 2021.

You want to debate the policy that is one thing but your blaming of Trump and the GOP is an epic fail when your guy and party have had two years to increase regulation of banks and otherwise undo Trump.

 

[22lcidw]

Relatively speaking yes.

Progs paying off the rich again while constantly hammering about the working-class peasants getting screwed.

 

[Care4all]

Relatively speaking yes.

No, they were not a small bank....lesh!

The deregulation of 2018 changed the definition of a small bank from doing under $50 billion in business to doing under $250 billion.

THAT is the root cause of this incident.... They were exempt of all DoddFrank regulations because they were under $250 billion,

if the Trump deregulation of 2018 had not taken place and the under $50 billion was still considered a small bank exempt from regulation instead of the $250 billion the Bill changed it to, the SVB failure would not and could not, have taken place.

It's a large bank, not a mom and pop community bank that can't afford complying with regulations. A small bank could never bankrupt the nation or require billions in govt bailouts....that's why easing regulations on them and the cost of regulation on them is a smart move and good for local communities...... A $200 billion dollar bank us NOT small, they can screw a lot of businesses, and individuals, and tax payers.... in the end

 

[LeftofLeft]

You might want to look at SVB’s Chief Risk Officer deviating from their core responsibility to work on modern woke policies as a factor. As a ‘Banker’, would you permit your chief risk officer to be working on anything else besides financial risk management?

 

[Lesh]

No, they were not a small bank....lesh!

The deregulation of 2018 changed the definition of a small bank from doing under $50 billion in business to doing under $250 billion.

THAT is the root cause of this incident.... They were exempt of all DoddFrank regulations because they were under $250 billion,

if the Trump deregulation of 2018 had not taken place and the under $50 billion was still considered a small bank exempt from regulation instead of the $250 billion the Bill changed it to, the SVB failure would not and could not, have taken place.

It's a large bank, not a mom and pop community bank that can't afford complying with regulations. A small bank could never bankrupt the nation or require billions in govt bailouts....that's why easing regulations on them and the cost of regulation on them is a smart move and good for local communities...... A $200 billion dollar bank us NOT small, they can screw a lot of businesses, and individuals, and tax payers.... in the end

So rolling back that reg classed them as a small bank when they were not.

It eased the stress tests that would have shown the danger here

 

[cnm]

True, the filibuster might have stopped it.

Might? The Republicans had sworn pretty much to oppose all legislation.

 

[cnm]

Biden and the Democrats have been in power for two years. How come they didn’t undo what Trump and the Republicans did on deregulation of banks?

The standard complaint.

Trump's fuckups have not been fixed quickly enough.

What a hoot.

 

[Care4all]

You might want to look at SVB’s Chief Risk Officer deviating from their core responsibility to work on modern woke policies as a factor. As a ‘Banker’, would you permit your chief risk officer to be working on anything else besides financial risk management?

Fyi....that is BONKERS!

I wouldn't repeat or try to promote that silly right wing lie, it only makes you look like a laughable fool, which you would be if you continued down that road, and if you understood one iota of why SVB failed!

Don't let yourself be played like this....

 

[Care4all]

So rolling back that reg classed them as a small bank when they were not.

It eased the stress tests that would have shown the danger here

Yes!!!

 

[LeftofLeft]

The standard complaint.

Trump's fuckups have not been fixed quickly enough.

What a hoot.

Oil and gas policies were changed within hours of Biden taking office. If this policy was so bad, how come Democrats have not done anything in two years running? Your blame of Trump looks more foolish when you don’t even ask why no movement from Democrats.

 

[Lesh]

Progs paying off the rich again while constantly hammering about the working-class peasants getting screwed.

Oh shut the fuck up. Jesus

Paying off your ass

 

[LeftofLeft]

Fyi....that is BONKERS!

I wouldn't repeat or try to promote that silly right wing lie, it only makes you look like a laughable fool, which you would be if you continued down that road, and if you understood one iota of why SVB failed!

Don't let yourself be played like this....

You need to prove it was a lie. Further, what is wrong with the notion that a chief risk officer be tasked with anything only related to impact of risk to the bank and its customers?

 

[j-mac]

Okay, so... If this article is correct, the deregulation DID play a role here:

=============

"Because Trump’s EGRRCPA eliminated important elements of Dodd-Frank’s Title I, Silicon Valley Bank and other banks of that asset size, are not required to calculate and report the Liquidity Coverage Ratio, the Net Stable Funding Ratio, or to conduct comprehensive liquidity assessment reviews.

"The purpose of the Liquidity Coverage Ratio (LCR) is for banks to add up all of their high quality liquid assets such as cash, U.S. treasuries, AAA investment grade fixed income securities, and other cash equivalents. That figure is then divided by net stressed cash outflows; this is the part where banks have to calculate all the ‘what if’ scenarios. This part of the LCR requires banks to simulate what happens when big deposits or a significant number of deposits flee. The LCR also asks banks to calculate what happens to them when large receivables do not come in or how a bank is impacted when its biggest counterparties default. Dividing the numerator by the denominator tells you if a bank is sufficiently liquid in periods of stress. If the result is 100 or preferably much higher, banks should be able to meet their obligations at least for a month even in stressed obligations."

============

So if a bank's internal bond holdings do not have to be totaled based on current NET valuation -- such as when the value of bonds drop as they have -- its balance sheet can be significantly off. That's why Moody's was in the process of downgrading SVB's rating when the shit hit the fan.

I wouldn't be surprised to see that rule changed back now, and I wouldn't be surprised if some kind of interest rate hedging were required.

Just a question,

If the bank (management) were acting in such irresponsible ways, where were the regulators?