Carlo Alberto Giusti, Filippo Luigi Giambrone, Key Takeaways from Recent Failures of US Banks: Drawing Lessons from the Reasons and Outcomes of Silvergate Bank and Signature Bank Defaults, Considering the Perspective of International and European Regulatory Banking Laws, 2023, Nr. 38, Issue 10, p. 375-386 *

The key interest rates, which have risen since March 2022, continued with an increase in long-term yields on advanced economies government bonds in Europe and North America by 1.7 to 2.2 percentage points. In addition, the rise in interest rates increased banks’ financing costs which in turn reduces the financing conditions of households and companies. The rise in interest rates has led to falling bond prices and reduced their value on banks’ balance sheets. The Silicon Valley Bank (SVB), a US bank specialising in US startups, had to sell high-loss bonds in mid-March 2023 to offset deposit outflows to operate. Due to liquidity bottlenecks, SVB and two other small US banks, Signature and Silvergate, closed. This has unsettled the financial markets. Silvergate Bank held assets in cryptocurrency. The failure of SVB was caused by mismanagement, inadequate oversight by the board of directors and senior leadership, and insufficient action from Federal Reserve supervisors. This highlights weaknesses in regulation and supervision that need to be addressed. The report emphasises the need to strengthen the Federal Reserve’s supervision and regulation based on the lessons learned from SVB’s failure. It identifies four key takeaways: SVB’s failure to manage risks, supervisors’ failure to fully understand vulnerabilities, inadequate actions taken to address identified problems, and the negative impact of the board’s tailoring approach on supervision