US banking crisis: Lapses in regulatory oversight led to the collapse - The Tribune India

Join Whatsapp Channel

US banking crisis

Lapses in regulatory oversight led to the collapse

US banking crisis

THE US authorities are scrambling to protect depositors’ money after the back-to-back collapse of Silicon Valley Bank (SVB), Silvergate Capital Corporation and Signature Bank, which were major lenders to the crypto sector and tech startups. - Reuters file photo



THE US authorities are scrambling to protect depositors’ money after the back-to-back collapse of Silicon Valley Bank (SVB), Silvergate Capital Corporation and Signature Bank, which were major lenders to the crypto sector and tech startups. In a desperate bid to affirm the stability and credibility of the American banking system, the Joe Biden administration has granted SVB customers access to their money. Depositors of Signature Bank, which was closed on Sunday by the New York state financial regulator, have been promised compensation ‘at no loss to the taxpayer’. Silvergate has said that it would be winding down operations and liquidating its bank.

SVB was among the top 20 American commercial banks till last year. It is the largest bank to be shut in the US since the 2008 financial meltdown, whose prime casualties included Washington Mutual and the Lehman Brothers’ global investment bank. A link between them has surfaced: SVB’s Chief Administrative Officer Joseph Gentile had worked with Lehman Brothers as Chief Financial Officer until he quit in 2007, a year before the 158-year-old giant went bankrupt, nearly bringing down the global financial system.

President Biden has stated that he is ‘firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight of larger banks so that we are not in this position again.’ It is evident that lapses in regulation — coupled with an aggressive, risk-prone monetary policy aimed at taming inflation — brought things to such a pass. The writing was on the wall, but it was ignored. Short-seller William C Martin, former manager of a now-closed hedge fund, had already warned in January that SVB would blow up sooner rather than later. The fiasco holds a bitter lesson for US regulators and stakeholders: set your own house in order before losing sleep over smaller yet fast-growing economies. The key takeaway for India, which was rocked by the Punjab National Bank scam in 2018, is that no one can afford to ignore the warning signs. The regulatory system needs to be proactive rather than reactive to prevent a financial bloodbath and ensure the safety of people’s deposits.


Top News

IAF plane with 45 bodies of Indians takes off from Kuwait

IAF plane carrying bodies of 45 Indians killed in Kuwait fire lands in Kochi

One from Punjab and one from Haryana among dead

Kuwait fire: Mortal remains of 31 Indians received at Kochi airport, political leaders pay tributes

Kuwait fire: Mortal remains of 31 Indians received at Kochi airport, political leaders pay tributes

An IAF flight carrying the mortal remains of 45 Indians who ...

Punjab man who died in Kuwait fire tragedy was sole breadwinner of his family

Punjab man who died in Kuwait fire was sole breadwinner of his family

Hoshiarpur native Himat Rai was among those killed in a deva...

Supreme Court issues notices on NTA's plea seeking transfer of cases on NEET-UG row from high courts to it

Supreme Court issues notices on NTA's plea seeking transfer of cases on NEET-UG row from high courts to it

The vacation bench comprises Justices Vikram Nath and Sandee...

Fire breaks out at Acropolis Mall in Kolkata

Fire breaks out at Acropolis Mall in Kolkata

Multiple fire tenders have been dispatched to the scene as f...


Cities

View All