CFO Intelligence Magazine – Winter 2024

Mark D. Mishler

A CFO’s Perspective on Banking Turmoil — Past Causes and Present Effects

The current banking turmoil began with the collapse of Silicon Valley Bank (SVB), which infected the total banking industry, and this upheaval has potential negative implications for all companies that need to borrow money. The traditional risk-assessment and regulatory-compliance focus on financial institution risk arises from analyzing loans, financial security investments, deposits, and interest revenue recognition policies.

This bank liquidity turmoil resulted from inappropriate bank management actions and
feckless U.S. Government oversight regulation. Bank deposits increased significantly
due to U.S. Government quantitative easing, which flooded the economy with liquidity,
reducing interest rates to historically low levels. But instead of matching financial asset
investment duration with short-term deposit liabilities, bank management boosted
financial risk by investing in longer-term financial assets to earn higher interest income.
U.S. Government bank regulators required no corrective action.