Irish Examiner view: Familiarity with financial failure

Silicon Valley Bank collapse

Some observers have linked the SVB collapse to looser regulation introduced under former US president Donald Trump. Picture: AP Photo/Jeff Chiu

The news drifting across to us from California of the failure of Silicon Valley Bank seems remote at first. After all, the sudden collapse of a financial institution most of us have never heard of — and which dealt primarily with a its own specific constituency, the tech sector on the US west coast — could surely have little impact on these shores.

However, if the great crash of 2008 taught us anything it was the harsh lesson that the fallout from the remotest financial catastrophes can resonate close to home. Global banking and finance is a fluid, interdependent area, and the collapse of SVB has already had an impact here. The share price of AIB and Bank of Ireland dropped by about 7%, reflecting a general European unease with the news.

As pointed out by the Irish Examiner, there are some uncomfortable parallels between SVB and its focus on the tech sector on one hand, and the great cautionary tale from Irish finance a decade and a half ago on the other — namely, Anglo Irish Bank’s heavy reliance on a relatively small number of developers.

The reason for this collapse, however, looks significantly different. The festering recklessness of the US mortgage industry was the inciting incident back in 2008, while economists are pinpointing the rise in interest rates since the recovery from the global financial collapse as being responsible for current bank concerns.

However, monitoring and regulation continue to be depressingly familiar issues with financial institutions. 

Regulatory regimes were the subject of scathing criticism in the crash 15 years ago, and there’s a familiar ring to analysis of the current problem: Some observers have linked the SVB collapse to looser regulation introduced under former US president Donald Trump.

Why was that regulation loosened? Because of lobbying by the banking industry. Which has now gotten itself into yet another mess.