What Silicon Valley Bank and Credit Suisse tell us about financial regulations

By Jon Danielsson Charles Goodhart

"The downfall of Silicon Valley Bank and Credit Suisse has exposed failures in how we regulate the financial system. This column argues that the problems we now see in the system have arisen because the financial authorities have been trying to do the impossible: maintain growth while keeping inflation under control and financial stability high. The best way forward would be to focus on shock absorption and moral hazard, not the current approach of buffers and risk measurements."

"Those post-2000 G20 financial reforms are founded on the philosophy of modern regulations. The notion is that all important risk is identified and measured, to be used by banks and the financial authorities to determine the appropriate level of risk. Then it is easy for the banks and regulators to fine-tune risk. If we need more growth, reduce capital requirements, as we did in March 2020, or demand more capital if risk is too high, as we should have done before 2008."

"Furthermore, it is easy to address the moral hazard created by banks being limited liability corporations managed by people who get bonuses when things go well, while being protected from the downside. We cannot return to the pre-Victorian approach of unlimited liability for all because it would mean that banks could never get equity capital from outsiders. But there is no reason why we could not require senior bank management to face multiple liability and, in the case of CEOs, possibly to have unlimited liability. If senior management faced a really serious loss when their bank failed, there would be far less need for masses of restrictive regulations. "

"The question, then, is how financial regulations should respond to the current market turmoil and rising long-term systemic risk. While there are viable solutions, such as curtailing moral hazard, increasing shock absorption, and new technology, we suspect the lessons learned will be different. The financial authorities will double down on current approaches, with more stringent regulations and higher capital levels that ultimately will hurt the economy and increase systemic risk."

SOURCE:

https://cepr.org/voxeu/columns/what-silicon-valley-bank-and-credit-suisse-tell-us-about-financial-regulations

Comments

A Rabbi Against the State: When Faith Refuses Power

In a world where identity is weaponized and religion is drafted into political armies, the sight of an ultra-Orthodox rabbi standing beside Palestinian flags unsettles nearly everyone. Yet there stands — black coat, beard, sidelocks — calmly declaring something that scrambles modern assumptions: “ Judaism is not Zionism.” For him, this is not rebellion . It is obedience . Affiliated with , a small and highly controversial Haredi sect, Rabbi Beck represents a theological current that predates modern nationalism. His argument is not secular. It is not progressive. It is not post-modern. It is ancient . And that is precisely the point. The Interview That Disturbs Categories In one widely circulated long-form interview, the exchange unfolds with almost disarming simplicity. Interviewer: Rabbi Beck, how can you oppose Israel as a Jewish rabbi? Rabbi Beck: Judaism and Zionism are two completely different things. Judaism is a religion. Zionism is a political movement founded little more ...

When the Warning Comes from the General Moshe Ya’alon, Jewish Supremacy, and the Echo Nobody Wanted to Hear

History has a cruel sense of irony. Sometimes the most devastating indictments do not come from the oppressed, the bombed, the buried, or the silenced—but from the very architects of power who once swore they were different. This week, that indictment came from Moshe Ya’alon : former Israeli Defense Minister, former IDF Chief of Staff, lifelong pillar of Israel’s security establishment. Not a dissident poet. Not a radical academic. Not a Palestinian survivor. A general. And what he said shattered the last polite illusion. “ The ideology of Jewish supremacy that has become dominant in the Israeli government is reminiscent of Nazi race theory.” Pause there. Sit with it. This was not shouted at a protest . It was not scribbled on a placard. It was written calmly, deliberately, after attending a Holocaust Remembrance ceremony —then reading reports of Jewish settlers attacking Palestinians , blocking ambulances , fracturing skulls , burning homes. Never Again, apparently, now ...

The High Priest of “Serious” Wars Discovers Bibi

There was a time when rode into every Middle Eastern catastrophe like a TED Talk with a press pass. If there was a war to explain, a regime to modernize, or a “vital message” to send with cruise missiles, Tom was there — sleeves rolled up, metaphors polished. Back when the invasion of was sold as a democratic software update, Friedman wasn’t exactly storming the barricades. He was midwifing “creative destruction.” The region would be shocked into sanity. History would bend toward market reform. Fast forward. Now he’s discovered that might be bending something else entirely. When an Ex–Prime Minister Uses the Words “Ethnic Cleansing” What jolts Friedman’s latest column is not campus rhetoric. Not activist slogans. Not fringe NGOs. It’s — a former Israeli prime minister — using language that once would have detonated diplomatic careers. Olmert wrote in Haaretz that: “A violent and criminal effort is underway to ethnically cleanse territories in the West Bank.” Let...

Blood in the Car Park: Islamophobia and the Fear That Follows Us to Prayer

On a cold February evening in 2026, 18-year-old Zeeshan Afzal was stabbed to death in the parking lot of Oldbury Jamia Masjid, near Birmingham. He had just prayed. He had just stood shoulder to shoulder with other worshippers in Ramadan — the month of mercy, of restraint, of forgiveness. Minutes later, he lay bleeding in the dark. Police have said the investigation is ongoing and that the killing is not currently being treated as religiously motivated. That is an important and responsible clarification. Motive must be established by evidence, not emotion. And yet. Across Muslim communities in Britain and Europe, the question whispers through homes and WhatsApp groups alike: Are we safe? Even at the mosque? The Atmosphere We Cannot Ignore Even when a specific case is not officially labeled a hate crime, it unfolds within a larger social climate. And that climate matters. Across Europe, reports of anti-Muslim hate crimes have surged in recent years. Mosques vandalized....

Noam Chomsky and the Silence That Broke a Generation

There are betrayals that anger us. And then there are betrayals that leave us quiet. Noam Chomsky belongs to the second kind. For more than half a century, Chomsky stood as a moral compass in an age without direction . He taught generations how power lies, how empires manufacture consent, how language itself becomes a weapon in the hands of elites. He spoke for the voiceless when it was costly, unfashionable, and dangerous . For many of us, he was not merely an intellectual —he was a refuge . Proof that clarity could survive corruption. Proof that integrity could endure. Which is why this moment does not feel like scandal . It feels like mourning . Chris Hedges is right to frame the association between Noam Chomsky and Jeffrey Epstein not as gossip or moral theater, but as a rupture —a crack in something we believed was unbreakable . Epstein was not simply a criminal. He was the embodiment of everything Chomsky spent his life exposing : elite impunity, predation disguised as ...

Ainnbeen

Search This Blog