Worried About the Next SVB?
By CubeLogic’s Karl Sees, Global Head of Product Strategy & Pre-Sales
March 13, 2023
Hopefully, you are reading this whilst breathing a sigh of relief that neither you nor your business were exposed to the Silicon Valley Bank (SVB) crisis.
You no doubt will be wondering how SVB’s risk culture and controls could have degraded to the point where it bought $128bn of mainly long dated fixed income bonds at the height of the bond bubble without protecting the balance sheet from the inevitable and existential threat of interest rate hikes. After all, SVB is not a novice; it has been in business for 40 years, so you’d think it would have grasped the basics of risk management by now.
You might also be forgiven for being shocked that the regulators allowed the 16th largest US bank to get so massively over-extended to interest rate risk. But the reality of US banking regulation is that a 2-tier system allows for a very light touch approach for anyone but the largest internally active banks. In part, due to the power of the community bank lobbying effort.
Once you’ve marvelled through these astonishing facts you are bound to switch to the classic CRO reflections. Could it happen here? Am I exposed to the next company blow up as a result of weak risk management? This is where thorough credit analysis, as well as sound risk management systems and solid portfolio management, are absolutely vital.
If you are contemplating an upgrade to your credit risk management systems don’t leave it too long. Come and talk to CubeLogic about our multi award-winning enterprise risk management platform, RiskCubed, and our unique integration with S&P CapIQ credit analytics.