The SVB impact
The sudden fallout of Silicon Valley Bank run shows its callous approach towards Risk Management and Asset Liability Management (ALM) fields. (“SVB’s collapse calls for a fresh look at regulations”, March 13). The investment decisions taken by the Bank also reflect the team’s poor strength in analytical ability in making investment decisions.
Globally when Risk Management and ALM are being given due importance in investment as well as in lending, it is a bit surprising that the SVB failed to adhere to the basic tenets of investment banking.
The collapse calls for stricter regulatory vigilance on other counts too, sending its vibrations across the banking sector globally. Many small scale investors keep their fingers crossed on getting back their deposits. The US Federal Reserve has to tighten its norms on vigilance and ensure strict implementation with main focus on stressed assets, bad loans and capital adequacy.
The Silicon Valley Bank collapsed in California after facing insufficient liquidity and insolvency and the effect could be seen in businesses around the world. But its repercussions will be felt the most by a growing army of the unemployed in the tech sector that has been seeing some massive layoffs off lately.
The primary reason for the SVB collapse was because interest rates have been increasing for a year now thanks to Fed policy. It is arguable whether interest rate raises have controlled runaway inflation and the negative impact of a high interest regime is there for all to see.
As costs creep up and low growth kicks in, volatility lies ahead.
N Sadhasiva Reddy
Threat to Democratic norms
It was really disturbing to learn that the Lok Sabha was adjourned for the day amid uproar over Rahul Gandhi’s remarks against the Indian democracy in UK and the treasure benches quickly demanding an apology from him and the Opposition also seeking a JPC probe into the Adani-Hindenburg issue. Where are we heading?
How long would such forced yet grossly unjustifiable adjournment of the Parliament continue? What message do our ‘political masters’ wish to convey to the global community by showing scant respect to the well established democratic norms?
Financial sector safety
This refers to the report ‘Bankers rule out second-order impact’ (March 13).
Indian lawmakers and financial regulators have been taking adequate care to insulate household savings invested in banks and financial institutions from the shocks such deposits are usually subject to.
We have faced crises in the past.
But comparatively, the shock absorbers have functioned quite robustly during every crisis.
The professionalism of the regulators, high reserve ratio requirements and the speed with which crises were managed with active government support have all contributed to maintaining this level of success in financial sector management.
We need to strengthen the institutional system, from RBI to the front desk in the remotest bank branch further, considering the international scenario and the rise in uncertainties with the fast and unbridled growth and use of technology, without proportionate human resources/skills development.