In the wake of the recent collapse of Silicon Valley Bank and Signature Bank — and subsequent banking industry developments in the United States and elsewhere — markets and the public should be reassured by the response of federal regulators to cover depositors and maintain confidence and stability in the resilient U.S. banking system, according to Timothy Burniston, a senior regulatory compliance expert at Wolters Kluwer Compliance Solutions.
“Identifying the root causes leading to the collapse of Silicon Valley Bank and Signature Bank is still very much a work in progress. Significant, meaningful efforts are underway in the federal government to comprehensively investigate and review these failures and help avert additional problems,” Burniston, who is a senior advisor of regulatory strategy for Wolters Kluwer Compliance Solutions, said. “However, what we can point to in the early days of these developments is that regulators and major banks are collectively working to stem further losses and instill confidence.”
Federal regulators moved promptly following the failures of Silicon Valley Bank and Signature Bank to ensure that customers were able to access all of their deposits beyond the $250,000 insured by the Federal Deposit Insurance Corporation. Meanwhile, a collection of 11 major banks committed $30 billion in uninsured deposits in First Republic Bank to display confidence in the U.S. banking system following the collapse of Silicon Valley Bank and Signature Bank.
“This past weekend, we saw further mitigation efforts by the Federal Reserve and five central banks across the globe with the announcement of a coordinated expansion in the frequency of dollar swap line arrangements to help boost liquidity as part of a growing response to banking industry turmoil. We also saw UBS announce its acquisition of Credit Suisse to help shore up global markets,” Burniston said. “And we expect more positive measures by regulators and the industry to address and calm the current turbulence in the industry in the days to come.”
Burniston cited economic factors that may have played a role in these collapses, reinforced by Wolters Kluwer’s most recent Regulatory & Risk Management Indicator survey, which indicated that 73% of respondents were highly concerned about interest rate increases. Burniston further emphasized that for each failed institution, resolution and review processes should be allowed to play out and that close attention should be paid to lessons learned to help others avoid the same fate.
“Although there are many open questions that will be answered in the coming weeks, we should be encouraged by the regulators and industry leaders that stepped forward assertively and decisively to help prevent far greater detrimental effects to the banking industry,” Burniston said.
