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As well they might, the repercussions from this will have profound effects in years to come.
Critics label handling of Californian lender’s failure a ‘disaster’ and claim Washington is failing to adhere to global rules
Europe’s financial regulators are furious at the handling of the Silicon Valley Bank collapse, privately accusing US authorities of tearing up a rule book for failed banks that they had helped to write.
While the disapproval has yet to be conveyed in a formal setting, some of the region’s top policymakers are seething over the decision to cover all depositors at SVB, fearing it will undermine a globally agreed regime.
One senior eurozone official described their shock at the “total and utter incompetence” of US authorities, particularly after a decade and a half of “long and boring meetings” with Americans advocating an end to bailouts.
Europe’s supervisors are particularly irate at the US decision to break with its own standard of guaranteeing only the first $250,000 of deposits by invoking a “systemic risk exception” — despite claiming the California-based lender was too small to face rules aimed at preventing a rerun of the 2008 global financial crisis.
“This is the US version of the small Venetian banks,” said one French policy expert, referring to the US’s criticism of Europe’s handling of the failure of Banca Vicenza and Veneto Banca in 2017, where senior bondholders were protected from losses. “You are always systemic for somebody.”
From a financial stability perspective, they really killed a fly with a sledgehammer,” said Nicolas Véron, a regulation expert at the Washington think-tank the Peterson Institute. Designating SVB as systemic was, Véron added, a “very questionable” decision that set a dangerous precedent for further bailouts of uninsured deposits.
https://www.ft.com/content/5e4a8dde-c053-4510-8cd9-8aecb9082a6e
As well they might, the repercussions from this will have profound effects in years to come.
Critics label handling of Californian lender’s failure a ‘disaster’ and claim Washington is failing to adhere to global rules
Europe’s financial regulators are furious at the handling of the Silicon Valley Bank collapse, privately accusing US authorities of tearing up a rule book for failed banks that they had helped to write.
While the disapproval has yet to be conveyed in a formal setting, some of the region’s top policymakers are seething over the decision to cover all depositors at SVB, fearing it will undermine a globally agreed regime.
One senior eurozone official described their shock at the “total and utter incompetence” of US authorities, particularly after a decade and a half of “long and boring meetings” with Americans advocating an end to bailouts.
Europe’s supervisors are particularly irate at the US decision to break with its own standard of guaranteeing only the first $250,000 of deposits by invoking a “systemic risk exception” — despite claiming the California-based lender was too small to face rules aimed at preventing a rerun of the 2008 global financial crisis.
“This is the US version of the small Venetian banks,” said one French policy expert, referring to the US’s criticism of Europe’s handling of the failure of Banca Vicenza and Veneto Banca in 2017, where senior bondholders were protected from losses. “You are always systemic for somebody.”
From a financial stability perspective, they really killed a fly with a sledgehammer,” said Nicolas Véron, a regulation expert at the Washington think-tank the Peterson Institute. Designating SVB as systemic was, Véron added, a “very questionable” decision that set a dangerous precedent for further bailouts of uninsured deposits.
https://www.ft.com/content/5e4a8dde-c053-4510-8cd9-8aecb9082a6e