Banks may have survived the turmoil of
2023, but the lessons from last year’s liquidity crises are still being
absorbed.
When Silicon Valley Bank and Credit Suisse
collapsed within days of each other, it became clear that the post-2008 risk
frameworks that were meant to prevent such failures had not evolved fast enough
to keep pace with modern markets and digital contagion.
Speaking at CeFPro’s Risk Evolve 2025, a former
adviser at the European Central Bank’s DG Macroprudential Policy and Financial
Stability, reflected on the contrasting stories of those two institutions.
“Credit Suisse and SVB were very different
cases, he told delegates, “but they shared the same fatal weaknesses: poor risk
management, flawed asset-liability structures, and the reputational triggers
that accelerated their downfall.”
He noted that while Credit Suisse suffered
years of governance failures and reputational damage, SVB’s demise was rooted
in an unsustainable business model.
“They held too many long-term bonds that
lost value when interest rates reversed, and their deposits were mostly
unsecured and concentrated among connected customers,” the adviser explained.
“Social media amplified the panic - tweets from investors spread faster than
any traditional rumor mill.”
For regulators, these events redefined how
liquidity risk must be measured and monitored. The speaker stressed that
asset-liability management must be tightly integrated with liquidity stress
testing and contingency funding plans.
“Supervision has to be serious and
intrusive,” he said. “Given how quickly deposits can vanish, stress tests
should include strong outflow scenarios and robust contingency planning.”
A fellow panellist from the banking sector
agreed that 2023 underscored the need for realism in stress models.
Outflows happened “much faster and in
different places than in 2008,” the executive observed, adding that social
media and digital channels have radically shortened the time between perception
and crisis.
The former ECB adviser cautioned, however,
against the simplistic regulatory response of merely raising outflow rates in
liquidity coverage ratios.
“If you tried to calibrate them to the SVB
case, you’d have to multiply outflows by ten or even a hundred,” he said.
“That’s not the solution. The real challenge is to improve contingency funding
and to think beyond a one-month horizon.”
