The View | How China can learn from the mistakes in US banking culture and oversight
- As China looks to reform its banking regulations, it can avoid US pitfalls, such as letting regional banks lend excessively to one sector or allowing skewed boards
- Importantly, the siren call of lobbying for looser banking rules and regulations must be ignored
The recent and still-reverberating regional banking troubles in the United States require a frank assessment of the failures and faults by many actors. Central bankers and supervisors in other jurisdictions could learn lessons from America’s mistakes, in matters related to bank culture, regulation and supervision.
On bank culture, a topic on which the Group of Thirty has opined repeatedly, the lessons are clear. A firm’s culture, demonstrated by the board and leadership, determines risk appetite. The culture signals to mangers what to do and how to do it.
The companies became too close to their customers. They adopted risk-taking inappropriate to their social and economic roles. When the easy money stopped, these banks faced dangers similar to those of their overleveraged and concentrated customers.
In America, the banks’ boards appear to have failed to oversee the management and rising risks. SVB’s management was rated “deficient’ by regulators the year before its collapse. The SVB board was dominated by venture capitalists of a particular risk-taking Silicon Valley mindset.
