cover image: The Fall of Silicon Valley Bank: A Warning for Emerging Markets

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The Fall of Silicon Valley Bank: A Warning for Emerging Markets

16 Mar 2023

Although the actions by the US authorities have so far calmed local markets, fears of contagion around the globe continue (witness Credit Suisse’s current troubles), and many observers are asking the obvious questions: Where were the regulators in the lead up to the crisis? What happened to the strict regulations imposed on banks after the Global Financial Crisis, including Basel III, the internat. [...] My view is that the Fed and the central banks of most emerging markets are doing their job, using the tools at their disposal for controlling inflation and protecting financial stability, but there are faults in existent regulatory and supervisory frameworks that weaken supervisors’ ability to detect the build-up of problems in the banking systems. [...] Complementing the Dodd-Frank regulations of 2010, in 2013 the US chose to adopt Basel III, applying liquidity requirements only to large and internationally active banks, which are considered to be a potential risk to the financial sector. [...] 2 In implementing the Economic Growth, Regulatory Relief, and Consumer Protection Act, the Office of the Comptroller of the Currency stated in 2019: “Specifically, the final rule revises the minimum threshold for national banks and Federal sav- ings associations to conduct stress tests from $10 billion to $250 billion, revises the frequency by which certain national banks and Federal savings assoc. [...] The variable Powers of Supervisory Authority measures the independence and capacity of the supervisory authority to look after financial stability and intervene and restructure banks when necessary.
Pages
7
Published in
United States of America