Analyzing the Collapse of Silicon Valley Bank: Are Regulations Too Lax?

The collapse of Silicon Valley Bank (SVB) has left many customers wondering if their money is safe.[0] The US government insures the first $250,000 in eligible accounts, so if you have less than that in your account, you should have nothing to worry about.[0] However, this latest banking crisis has raised serious questions about the efficacy of the regulatory state.

Primary responsibility for the debacle lies with SVB’s management, but regulators should have been paying close attention to the bank’s rising vulnerabilities.[1] On Monday, the largest U.S. financial institutions took action to support the financial sector, investing $30 billion into First Republic Bank – one of the struggling local banks – even as other major banks gained depositors.[2]

As early as November 2019, one journalist had picked up on the increasing vulnerabilities of banks, such as Silicon Valley Bank, while the chair of the Federal Deposit Insurance Corporation had also sounded the alarm about the issue.[1] Some short sellers began taking a negative stance on the bank’s stock.[1] But the combination of reckless bankers and lax regulators has left us with a financial crisis and a federal-government bailout—and the well-rehearsed spectacle of regulators promising to do better next time.[1]

Last year, when SVB was less vulnerable, the San Francisco Fed (which regulated the parent company) and the California regulators (who oversaw the bank itself) could have required SVB to raise capital.[1] The bank could have been mandated to raise rates on its savings accounts, which would mean paying people more to lend it money.[1] But Donald Trump appointed Randal Quarles as the first-ever vice chair of banking supervision at the Federal Reserve, who saw it as his mission to relax the post-financial-crisis regime.[1]

The current crisis brings to light the age-old question of why the Federal Reserve is responsible for the regulation of banks.[1] In the years leading up to the 2008-09 financial crisis, an alphabet soup of regulators ostensibly shared responsibility for banking oversight along with the Fed, which allowed banks and financial entities to shop for the least restrictive.[1] Policy makers and legislators ultimately only closed down the least of them, the OTS, and kept the rest, each of which had its own constituency of supporters.[1]

The failure of Silicon Valley Bank highlights the need for tighter banking rules and better communication from regulators about what exactly they are worried about.

0. “Should I pull my money out of the bank? What to know about bank failures” CNN, 17 Mar. 2023,

1. “So Where Were SVB’s Regulators?” The Atlantic, 17 Mar. 2023,

2. “Here’s who made money amid the Silicon Valley Bank turmoil” ABC News, 17 Mar. 2023,