Many questions remain about what needs to change in order to avoid a repeat of the scenarios that led to the second and largest bank failures in US history.
SALT LAKE CITY — It's been nearly a month since the failures of Silicon Valley and Signature banks sent shockwaves through the global banking system. And while U.S. regulators moved quickly to prevent a domino effect from tearing through the banking sector, and both institutions are now under new ownership, many questions remain about what needs to change in order to avoid a repeat of the scenarios that led to the second and largest bank failures in U.S. history.
While banking heads and industry watchers await likely changes in regulatory and oversight policy on the heels of the failures, widespread concern among individuals and businesses have fueled a wave of depositor flight by customers at smaller banks who've moved assets to larger institutions they consider "too big to fail."
"The unknown risk was that SVB's over 35,000 corporate clients — and activity within them — were controlled by a small number of venture capital companies and moved their deposits in lockstep," Dimon wrote. "This is not to absolve bank management — it's just to make clear that this wasn't the finest hour for many players."
Dimon also noted in his letter that he expects new, heightened regulation will be among the outcomes of the federal inquiries into the bank failures and would like to see more stress tests that are guided by "real world" scenarios that can more accurately assess a bank's fiscal health. "Overall I continue to believe that the industry is in strong shape and good condition," Landon said. "But, it's pretty understandable that when you have multiple, simultaneous shocks that some people would rightfully wonder if there are systemic problems."
"Regulation, almost by necessity, is not fully anticipatory," Landon said. "I think we could all imagine how challenging it is to envision something that no one has seen before."
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