Since the great financial crisis of 2007-08 regulators have engaged in the biggest push to de-risk the global financial system since the 1930s. Yet instability and flawed risk management have proved extraordinarily resistant to this regulatory onslaught.
The collapse last year of Silicon Valley Bank, the 16th largest in the US, exposed very basic mistakes, not least a failure to hedge against the risk of surging interest rates undermining the value of its US government bond holdings. There followed a deposit run of hitherto unimaginable speed at SVB and other regional banks.
This, together with the forced sale in Europe of failing Credit Suisse to rival UBS, prompted Agustín Carstens, head of the Bank for International Settlements, to declare that “business models were poor, risk management procedures woefully inadequate and governance lacking”.