Forward Guidance The Basel III Endgame: Bank Regulation In A Post-SVB World | Steven Kelly
23 snips
Jul 11, 2023 AI Snips
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Episode notes
Fed Prefers Standardized Risk Floors Not Treasury Rerating
- Regulators will standardize risk measurement and limit reliance on banks' internal models rather than dramatically reweighting treasuries.
- Treasuries remain treated as very low risk despite showing interest‑rate price sensitivity.
Banks Hedge Interest Risk With Deposit Franchises Not Swaps
- Banks generally do not hedge interest‑rate exposure with swaps; only ~6% of aggregate assets are hedged.
- Banks 'hedge' by maintaining the deposit franchise and rolling assets as they mature rather than via large derivative programs.
2023 Crisis Was About Deposit Runs, Not Just Unrealized Losses
- The key interest‑rate risk in 2023 was deposit quantity shifts, not asset price moves: runoff increased funding costs and forced asset sales.
- Clientele concentration (tech, crypto) made some banks uniquely vulnerable to rate hikes.