SVB Failure-Lessons for Compliance

The award winning, Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt and I continue our exploration of the collapse of Silicon Valley Bank (SVB) and take a deeper dive into the compliance angles. Silicon Valley Bank had taken some big risks which led to depositors having a near-death experience, shareholders losing all their money, and taxpayers ultimately supporting the bank's bailout. Despite the auditors giving an anodyne report on the bank’s risk management, the board, management and regulators all missed the big strategic risks. As a result, the bank collapsed, leaving Matt to question whether stakeholders were given the right assurance on the right things.

Key Highlights

·      What risk management strategies did SVB senior management and Board miss or ignore that could have prevented the financial disaster?

·      Why did SVB's management decline to pursue improvements to their risk management practices after being warned by BlackRock consultants? 

·      Did regulators miss the red flags raised by the San Francisco Fed examiners 18 months before the collapse of SVB?

Notable Quotes:

1.     "We should remember that really, the auditors’ report is going to give assurance on two points: Number one, is there a risk of material misstatement in the financial statements? And number two, does the audit firm have any substantial doubt about the organization's ability to continue as a going concern for roughly the next twelve months or so? That's how long it is. But it's those two things."

2.     "When you have Elizabeth Warren and conservatives both raising hell at the same time, it's a valid issue to go and look at then because that does not happen too often."

3.    "It's like nobody had thought about this when really once we rolled back DoddFrank protections and supervisory constraints specifically for mid-sized banks, which Republicans pushed through in 2018, once that happened, that became the systemic risk that regulators had to think about."

4.    "Everybody kind of sort of knew there was a problem, but a whole lot of finger pointing and not enough planning and assurance and communication to the public at large and to investors."

 Resources

Matt  on LinkedIn

Matt on Radical Compliance

Tom on LinkedIn

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