One year on from the sudden collapse of Silicon Valley Bank (SVB) and the ensuing turmoil that rippled through the banking sector, it’s no surprise that regulators are reflecting on what went wrong.
At the Annual Columbia Law School Banking Conference, the Fed’s Vice Chair for Supervision Michael S. Barr underscored the need to enhance supervision’s speed, force, and agility in regulatory response.
This acknowledgment is also a wake-up call for banks to make sure they have the capabilities to see, analyse, and act on high-quality real-time information where the risk profile demands it.
As Barr said, “Supervision must change and adapt with the evolving banking system.” In short, regulators and banks must embrace technological advancements and adopt robust risk management practices to ensure the stability and resilience of the banking sector.
The legacy of SVB
The failure of SVB – the first major bank failure since the Global Financial Crisis – necessitated an unflinching review of what went wrong. This introspection has revealed a systemic failure at multiple levels. SVB’s management was found lacking in adequately managing the bank’s risks, and its board failed to oversee management.
Importantly, the review also highlighted that Federal Reserve supervisors were slow in identifying issues and, when detected, did not act swiftly or forcefully enough to influence management behavior to take corrective action. This failure underscored the need for regulators to align their oversight with the risks, size, and complexity of supervised banks.
Barr highlighted that supervision aims to address weaknesses in risk management practices before they escalate and threaten the stability of the banking system. The SVB scenario has spurred a broader examination of regulatory response and systemic issues such as interest rate risk and liquidity risk management.
Actions are being taken by regulators around the world to ensure banks are adequately managing these risks and are well-prepared to withstand financial stress. This includes conducting targeted examinations, and, where necessary, requiring banks to bolster their capital position or mitigate specific risks.
In the US, the Federal Reserve is considering the imposition of additional capital or liquidity requirements beyond the regulatory norm for firms struggling to manage their risks efficiently.
Furthermore, Barr emphasized the importance of improving agility of supervision, enabling supervisors to make forward-looking judgments. By identifying potential developments or trends in risk early on, supervisors can take proactive measures to mitigate risks and strengthen the resilience of the banking system.
Real-time liquidity management is no longer ‘nice to have’
Barr’s speech shows the need for a commitment to better regulatory response, real-time analysis, decisive action, and continuous improvement in risk management practices. A reminder that real-time liquidity management is no longer ‘nice to have.’
If you want to mitigate risk and make your money work harder, you need easy-to-access, real-time data at your fingertips. It is essential for compliance and the cornerstone of successful strategic growth.
The Realiti suite addresses several regulators’ recommendations. It is the only liquidity intelligence solution to deliver real-time, enterprise-wide 360° visibility of a firm’s liquidity landscape, control over treasury activities and value-creating insights. All in one place.
Our client from Scotiabank says, “Realiti is the only proven provider in this banking liquidity space. Additionally, the architecture of the solution made implementation remarkably nimble. A progression from deal signing to global go-live deployment was seen in just a few short months. Realiti aggressively fends off regulators and also drives a strong business value contribution–further enhancing the value for Scotiabank,”
The outcomes for Planixs clients speak volumes – millions in savings on intraday liquidity buffer costs, ensuring compliance with evolving regulatory agendas, and supporting efficient and effective funding operations.
Realiti’s staged rollout plan ensures that high-priority items, such as regulatory compliance, can be addressed first. This approach allows treasuries to experience immediate benefits while providing the flexibility to customise and expand functionality in subsequent stages.
Here’s a warm invitation to talk to us and join the ranks of intelligent banks that have discovered the power of Realiti.