Managing and Reporting Liquidity Risks: Silicon Valley Bank Case

Authors : Gürol BALOĞLU, Kaan Ramazan ÇAKALI, Nazan GÜNGÖR KARYAĞDI, Kadir GÖKOĞLAN

Pages : 67-89

Doi:10.26650/MED.1301779

View : 40 | Download : 28

Publication Date : 2023-08-29

Article Type : Research Paper

Abstract :Liquidity problems are one of the most important causes of business failures. This risk can appear related to the funding structures and asset quality of the enterprises. In an enterprise operating in the banking sector, liquidity problems have the potential to contaminate the financial system and create social impacts, since funding is mainly composed of deposits. Therefore, liquidity risk in banking is among the risks that are closely monitored. The recent Silicon Valley Bank collapse offers important lessons for analyzing liquidity risks. In this study, the Silicon Valley Bank failure is analyzed as a case study. As changes in macroeconomic policies have an impact on the liquidity of the markets, it becomes important to monitor liquidity risks. In general, the liquidity risks in the banking system are followed with the ratios calculated over the scenarios, while the Silicon Valley Bank case in the USA showed that regulatory agencies do not use this monitoring mechanism for banks below a certain size. On the other hand, the weaknesses arising from financial reporting standards in reporting the asset quality, combined with this lack of monitoring, caused difficulties in monitoring liquidity risks for financial statement users. As a result, the demand for cash created by depositors in the banking sector caused the bankruptcy of Silicon Valley Bank. Lessons learned from this case can guide the active management of liquidity risks.
Keywords : Kurumsal Çöküşler, Likidite Riski, Likidite Riski Yönetimi, Silikon Vadisi Bankası