Amid the collapse of Silicon Valley Bank (SVB), some commentators have claimed a Trump-era rollback of financial regulations may have contributed to the situation.
While largely unknown outside California’s Silicon Valley tech corridor, SVB has for decades been a go-to financial institution for the country’s technology and health start-ups. One of the 20 biggest banks in the United States, it had over $200 billion in assets by the end of last year, according to CNN.
As of Friday, however, SVB was left in freefall as clients began a run on the institution, spurred on by higher interest rates and other factors, resulting in a spiraling chain reaction that has threatened to sink the institution and leave its customers in financial jeopardy.
In the fallout of Friday’s run on the bank, some reports noted that a rollback of banking regulations by former President Donald Trump might have weakened SVB’s ability to manage risks associated with interest rates. In 2018, according to The New York Times, Trump signed a bill that axed regulatory requirements for regional banks with less than $250 billion in assets.
Under the new rules, such institutions no longer had to submit to “stress testing” by the Federal Reserve and were no longer required to keep a certain amount of cash on hand to protect against the effects of financial shocks, the newspaper reported.
The Times noted in its report that the bill was championed by SVB CEO Greg Becker. Becker had pressed lawmakers in Congress to lessen regulation that placed higher scrutiny on certain banks, claiming that SVB had a “low risk profile of our activities and business model.” By 2018, his bank had spent roughly $500,000 to lobby for the changes that Trump ultimately signed into law, according to The Lever, an investigative news outlet.
The rules rolled back by the bill were first introduced in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act, a sweeping reform law signed by former President Barack Obama to address issues in the financial sector in the wake of the 2007-2008 global financial crisis and the Great Recession. As noted in a tweet on Saturday from businessman and former Obama economic adviser Robert Wolf, the Dodd-Frank Act originally required banks with over $50 billion in assets to submit to stress testing.
As of Saturday afternoon, Trump has not commented on SVB. Newsweek reached out to his communications team via email for comment.
In the wake of the run, California regulators shut down SVB and turned over control of it to the Federal Deposit Insurance Corporation (FDIC). It has since been reported that the bank had not employed a chief risk officer in the months leading up to Friday’s collapse and had not insured roughly 90 percent of its deposits.