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<p>Silicon Valley Bank's (SVB) collapse exposes fundamental problems in risk management, regulatory control, and governance models even after Basel III and Interest Rate Risk in the Banking Book (IRRBB) standards. The main reasons for SVB’s failure were too much exposure to long-term fixed-income securities, inefficient liquidity management, and high concentration of deposits. Consequently, the extended absence of a Chief Risk Officer (CRO) led to governance problems. Additionally, SVB was subject to interest rate fluctuations and liquidity shocks due to regulatory exemptions granted under the 2019 Basel III tailoring. This study provides a critical inquiry into the nexus of SVB’s risk management failures, regulatory loopholes, and changing financial stability risks similar to that of Lehman Brothers (2008), Washington Mutual (2008), and Credit Suisse (2023) in the banking sector. The key finding is that social media-driven bank runs have become a well-known phenomenon, contributing to large-scale withdrawals at breakneck speeds. However, this is a departure from the traditional liquidity risk framework. This highlights the need for tighter securities implies of Basel III and more prescriptive governance mechanisms with reactions to the evolving financial risks associated with the digital era. To avoid collapses similar to the one that occurred and thus ensure that banking becomes less complex while at the same time maintaining financial stability, risk assessment models must be strengthened, stress testing carried out robustly, and supervisory measures implemented proactively.</p>

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The collapse of silicon valley bank: a critical analysis of regulatory shortcomings and risk management under Basel III

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2025年6月21日

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  • Ali Al-Sari

摘要

Silicon Valley Bank's (SVB) collapse exposes fundamental problems in risk management, regulatory control, and governance models even after Basel III and Interest Rate Risk in the Banking Book (IRRBB) standards. The main reasons for SVB’s failure were too much exposure to long-term fixed-income securities, inefficient liquidity management, and high concentration of deposits. Consequently, the extended absence of a Chief Risk Officer (CRO) led to governance problems. Additionally, SVB was subject to interest rate fluctuations and liquidity shocks due to regulatory exemptions granted under the 2019 Basel III tailoring. This study provides a critical inquiry into the nexus of SVB’s risk management failures, regulatory loopholes, and changing financial stability risks similar to that of Lehman Brothers (2008), Washington Mutual (2008), and Credit Suisse (2023) in the banking sector. The key finding is that social media-driven bank runs have become a well-known phenomenon, contributing to large-scale withdrawals at breakneck speeds. However, this is a departure from the traditional liquidity risk framework. This highlights the need for tighter securities implies of Basel III and more prescriptive governance mechanisms with reactions to the evolving financial risks associated with the digital era. To avoid collapses similar to the one that occurred and thus ensure that banking becomes less complex while at the same time maintaining financial stability, risk assessment models must be strengthened, stress testing carried out robustly, and supervisory measures implemented proactively.