bank regulation

The Key Policy Lessons of SVB

Looking back at the March 2023 collapse of Silicon Valley Bank and the subsequent banking crisis, Stephen G. Cecchetti and Kermit L. Schoenholtz highlight two lessons that should guide the reform of bank regulation.

Deferred Bonuses as a Buffer Against Bank Failures

Hamid Mehran discusses proposals for reforming bankers' compensation to better align incentives and risk-taking. Mehran contends market-based, self-regulating compensation structures would enhance governance and financial stability more effectively than punitive bonus caps or clawbacks imposed by regulators.

Fear of Punishment Distorts Bank Financial Reporting

When bank employees are afraid of punishment from regulators, they are likely to conceal information about their faulty decisions. This in turn distorts the...