SVB should be an important concern for all central banks.
Unlike the 2008 crisis, central banks should deal with two conflicting aims: monetary stability v. financial stability.
Expanding liquidity to avoid a banking crisis can impact monetary stability in an inflationary scenario. The steady path of raising interest rates can negatively impact the financial system responsible for issuing the key money for national economies (i.e., banking liabilities).
In the US, the story behind the SVB mismanagement can be traced to the 2018 banking legal reforms making rules for midsized banks more flexible following lobbying by the financial industry - just after eight years of the famous Dodd-Frank Wall Street Reform and Consumer Protection Act.
Central banks are again navigating in uncharted waters.
Camila Villard Duran intervened on Friday 24 March 2023 at the LabTalks of the Brazilian Chamber of Deputies on the crisis following the bankruptcy of the Silicon Valley Bank in the United States. The replay of the programme (in Portuguese) is available below.
