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Clive Crook

SVB’s Regulators and Managers Ignored the Obvious

Just because an investment is “safe” doesn’t mean it can’t decline in value.

Open for deposits.

Open for deposits.

Photographer: Robert Gauthier/Los Angeles Times

The collapse of Silicon Valley Bank illustrates not so much a failure of regulation as of regulators. The distinction points to the difficulty of the task that lies ahead: Simply reworking the rules about capital and liquidity requirements won’t be sufficient. What will be necessary is a rethinking of the very notion of risk.

SVB’s breakdown suggests a degree of muddle among regulators and bank executives that’s hard to square with their undoubted dedication and expertise. Only people with years of training and experience, professionals who understand modern finance in minute detail, could fail to grasp what seems obvious to the naïve onlooker — that when the value of an asset goes down, its owner is less wealthy.