Banking leaders warn that risk must anchor strategy in wake of 2023 crisis

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In the wake of the 2023 regional bank collapses, including Silicon Valley Bank, the U.S. banking industry has been forced into a period of reflection, regulatory scrutiny, and strategic recalibration. 

For executives overseeing capital management and second-line risk, the crisis validated long-standing concerns while underscoring the urgent need for robust, enterprise-wide governance.

According to Sudhir Kumar, SVP and Head of Capital Management Oversight at US Bank, the failures were less surprising than they appeared from the outside. 

“These banks were outliers,” Kumar said, pointing to unusually concentrated balance sheets, weak governance, and fundamental lapses in risk discipline. 

The problem, he argued, was not only poor liquidity planning or mismanaged interest rate risk, but a deeper failure to integrate risk into strategic decision-making in a fast-changing macroeconomic landscape.

As rates rose sharply between 2021 and 2022, vulnerabilities in certain business models became impossible to ignore. 

What turned stress into crisis, Kumar explained, was the absence of real-time processes to capture and respond to risk signals. 

“Risk cannot just be a model or a metric - it has to be the connective tissue between strategy and execution,” he said.

Supervisors have since pivoted toward more active scrutiny. 

Institutions with significant treasury and custody operations have faced heightened demands for detailed asset-liability management, improved contingency funding, and sharper analysis of deposit behavior. 

Risk limits and early warning indicators, once treated as compliance checklists, are now recognized as essential safeguards.

Regulatory attention has also expanded. Beyond liquidity buffers and interest rate exposures, supervisors are pressing banks to articulate their risk appetites, strengthen capital planning, and integrate scenario analysis.