Insights

16 March 2023

Silicon Valley Bank model not broken, but needs refinement

Opinion by Josh Oliveira

Whenever things like Silicon Valley Bank (SVB) happen, many of us jump to what bills should have been passed or what controls should have been in place.

KPMG gave SVB and Signature Bank a clean bill of health weeks before the collapse. Nothing KPMG did wrong. They followed the script. But SVB was pretty much insolvent and had a severe asset liability mismatch. Are we looking at the right stuff? Have we fallen into a “parallel trench” environment, where everyone is digging their own trench deeper and deeper? How do we make sure to not forget to stand up and look over?

We know there’s value in experimenting with monetary policy to see what works best for economic prosperity, keeping in mind that we need to navigate the age-old debate of free markets vs. government intervention.

On the other hand, it’s also worth acknowledging that SVB was one of the first banks to get into the high-risk world of startup financing. You could argue SVB helped to drive a lot of the progress we have today by funding such innovators when no one else would—but accordingly, higher risk.

I don’t know what the future brings as it relates to hiring in GRC, but I imagine we will see a lot more FinTechs and startups prioritizing risk management, creating more opportunities for risk professionals to pivot into small and midsize companies.

As we consider broader market implications, it’s important to note that SVB carries a fraction of the systemic risk as Lehman Brothers. However, we are in a different social environment, and bank runs are mostly a human psyche problem.  

All crashes start with mania and panic. A company with assets doesn’t just go to zero. What causes that is FUD (fear, uncertainty, and doubt). But this time it’s FUD multiplied by social media, so that’s where additional collateral damage may arise.

Maybe someone should consider buying SVB. Perhaps more corporate VC can be a competitive strategy, particularly since M&A remains messy and it’s often slower to build new in-house.

Of course, that’s just a philosophical thought in the moment, but the point being is that I don’t think the SVB business model is broken, it just needs some refinement.

Josh Oliveira is a Financial Services & Fintech Leader from Ridgewood, New Jersey. He writes about finance and the world of GRC on LinkedIn.

Opinion by Josh Oliveira

Whenever things like Silicon Valley Bank (SVB) happen, many of us jump to what bills should have been passed or what controls should have been in place.

KPMG gave SVB and Signature Bank a clean bill of health weeks before the collapse. Nothing KPMG did wrong. They followed the script. But SVB was pretty much insolvent and had a severe asset liability mismatch. Are we looking at the right stuff? Have we fallen into a “parallel trench” environment, where everyone is digging their own trench deeper and deeper? How do we make sure to not forget to stand up and look over?

We know there’s value in experimenting with monetary policy to see what works best for economic prosperity, keeping in mind that we need to navigate the age-old debate of free markets vs. government intervention.

On the other hand, it’s also worth acknowledging that SVB was one of the first banks to get into the high-risk world of startup financing. You could argue SVB helped to drive a lot of the progress we have today by funding such innovators when no one else would—but accordingly, higher risk.

I don’t know what the future brings as it relates to hiring in GRC, but I imagine we will see a lot more FinTechs and startups prioritizing risk management, creating more opportunities for risk professionals to pivot into small and midsize companies.

As we consider broader market implications, it’s important to note that SVB carries a fraction of the systemic risk as Lehman Brothers. However, we are in a different social environment, and bank runs are mostly a human psyche problem.  

All crashes start with mania and panic. A company with assets doesn’t just go to zero. What causes that is FUD (fear, uncertainty, and doubt). But this time it’s FUD multiplied by social media, so that’s where additional collateral damage may arise.

Maybe someone should consider buying SVB. Perhaps more corporate VC can be a competitive strategy, particularly since M&A remains messy and it’s often slower to build new in-house.

Of course, that’s just a philosophical thought in the moment, but the point being is that I don’t think the SVB business model is broken, it just needs some refinement.

Josh Oliveira is a Financial Services & Fintech Leader from Ridgewood, New Jersey. He writes about finance and the world of GRC on LinkedIn.

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