One Year After Bank Crisis, a Struggle Over What Needs to Change

A year ago, the government and America’s largest banks joined forces in a rare moment of comity.

They were forced into action after Silicon Valley Bank collapsed on March 10, 2023, quickly followed by two other lenders, First Republic and Signature Bank. Faced with the threat of a billowing crisis that could threaten the banking industry — the worst one since 2008 — rivals and regulators put together a huge bailout fund. Eventually all three ailing banks were declared insolvent by the government and sold off.

The biggest banks emerged from the period even larger, after picking up accounts from their smaller rivals. But they have also grown more confident in challenging regulators on what went wrong and what to do to prevent future crises. Indeed, many bankers and their lobbyists now rush to describe the period as a regional banking crisis, a term that tends to understate how worried the industry was at the time.

One reason for the increased tensions is that government officials are proposing rule changes that lenders argue will crimp their businesses, and would not have done much to stem Silicon Valley Bank’s collapse. Regulators say that last year’s crisis proves that changes are needed. They point to the increasing risks in the commercial and residential real estate markets and the growing number of so-called problem banks, or those rated poorly for financial, operational or managerial weaknesses.

Here is the state of play, one year after the crisis:

What happened last spring?

In just a few days last March, Silicon Valley Bank went from a darling of the banking world to collapse. The lender, which catered to venture capital clients and start-ups, had loaded up on what was assumed to be safe investments like Treasury bonds and mortgages that were turning sour in an era of higher interest rates.

That might not itself have spelled doom. But when nervous depositors — many of whom had accounts larger than the $250,000 limit for government insurance — began to pull their money out of the bank, executives failed to assuage their concerns, leading to a bank run.

Soon after, two other lenders — First Republic, which like Silicon Valley Bank, had many clients in the start-up industry and the cryptocurrency-focused Signature Bank — also shut down, felled by bank runs of their own. Together, those three banks were larger than the 25 that failed during the 2008 financial crisis.