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

Delivering the Dead: How the World Watches Gaza Bleed.

Delivering the Dead: How the World Watches Gaza Bleed “ I delivered a beheaded woman who was nine months pregnant. ” That’s not a horror-film script. That’s not medieval history. That is the testimony of an Australian medic standing in a Gaza hospital in 2025, describing what it means to “ practice medicine ” under Israeli bombardment. A nine-months-pregnant woman , decapitated , her body torn open so that the child she carried could be pulled out lifeless — and somehow this is still not enough to shake the comfortable democracies of the West into anything resembling a conscience. We should probably give the Nobel Prize for Creative Euphemism to the politicians who still call this “self-defense.” After all, there’s nothing quite as defensive as severing the head of an expectant mother and forcing foreign doctors to deliver her dead child in the rubble of what used to be a hospital . Bravo, civilization . The tragedy is not just the atrocity itself. It’s the smug perfo...

Britain’s Recognition of Palestine: A Century of Complicity in Disguise.

So we’ve reached this moment: Keir Starmer’s UK “ recognises the State of Palestine. ” Applause lines up. Speeches made. Headlines dazzled. But behind the pomp, the guns, the exports, the intelligence, the training — history rings out in mocking laughter. Because Britain has been complicit since day one. This recognition is not redemption . It’s theatre. 1. The Original Sin: Balfour Declaration Let’s go back. Because if you don’t know your history, you’ll be fooled by the future. On 2 November 1917 , Arthur James Balfour (Britain’s Foreign Secretary) wrote to Lord Rothschild, and officially declared: “His Majesty’s Government view with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavours to facilitate the achievement of this object , it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine , or the rights and political sta...

Gaza’s Medical Apocalypse: Numbers, Neglect, and the Farce of “Access”

If you ever needed proof that statistics can be more damning than bombs, look at Gaza’s health crisis . Behind the headlines and hashtags lies a cascade of bodies and broken systems. We have numbers, we have reports, we have PDFs— and yet the world stares, unmoved, at the collapse. Below is your ruthless, numbers-soaked guide to the suffering —and the institutional failure—behind Gaza’s medical implosion . 1. The Health System Is Already Dead. We’re Just Counting the Corpse. According to WHO, “The Gaza Strip faces an unprecedented humanitarian crisis with rising mortality and widespread displacement.” Between 1 January and 31 August 2024 , local health authorities reported 18,900 deaths and 38,916 injuries . Women, children, and the elderly account for over 50 % of fatal casualties . More than 53 % of Gaza’s 36 hospitals were non-functional as of August 2024, and many of the partially functioning ones lacked adequate water or relied entirely on fuel generators. ...

The End of Zionism? Welcome to the Funeral Nobody Wants to Admit Is Overdue

Of course. Haaretz recently published an opinion piece by Ithamar Handelman -Smith titled “ Some Say It’s the End of Zionism, and I Say That’s All Right .” And what impeccable timing: as Israel carries out a near-two-year campaign of siege, famine, and bombardment in Gaza — slaughtering families, burying aid workers with their ambulances, and literally starving children to death — someone in Israel finally whispers the unspeakable: maybe Zionism, that 20th-century project of “ Jewish salvation ,” has outlived its moral shelf life. Bravo. The house is burning, bodies are scattered in the street, and the philosopher shows up with a garden hose . Zionism: Success Story or Crime Scene? Handelman-Smith argues that Zionism achieved its success : a Jewish state, a safe haven, a fortress against the ghosts of Europe’s crimes . But like every “ success story ” drenched in other people’s blood , it didn’t age well. What began as refuge turned into domination; what was called “ ...

The Ceasefire of Exhaustion: When Empires Collapse from Within

By Malik Mukhtar — ainnbeen.blogspot.com Two years after Gaza was first set on fire , the war that began with biblical vengeance has stumbled to an exhausted ceasefire . On October 9, 2025 , Israel and Hamas — after endless carnage, famine, and rubble — have signed the first phase of a ceasefire agreement mediated in Sharm el-Sheikh . Trump called it a “ historic peace plan. ” History may call it a truce of attrition — a war that collapsed under the weight of its own hubris. What the Ceasefire Says — and What It Doesn’t Under the agreement, Israeli forces are to pull back to a designated “yellow line” within 24 hours of cabinet ratification. Hamas, in turn, will release all remaining hostages — alive or dead — within 72 hours after the withdrawal. Israel will free about 2,000 Palestinian prisoners, though it made sure to exclude political figures like Marwan Barghouti , whose freedom would remind the world that Palestine still breathes. Humanitarian convoys — food,...

Ainnbeen

Search This Blog