TURBULENCE IN THE BANKING WORLD IN THE UNITED STATES BUT THE BASEL 3 AGREEMENT SHIELD EXISTS IN EUROPE

These are days of turmoil in the world banking scene: on March 10, 2023, the Californian authorities declared the bankruptcy of Silicon Valley Bank, the sixteenth largest American bank by size and a point of reference for the US High Tech industry, sowing panic on financial markets all over the world. the world. The reasons for the instability are to be found mainly in a liquidity crisis due to a mismanagement of the huge deposits collected during the pandemic emergency. Beyond the strictly technical reasons, the collapse of SVB has given way to highlight the inadequacy of controls on banking governance by the USA compared to the European system, where such a collapse could hardly have occurred thanks to the stringent regulation to which they are subject banking institutions. The European Commission has fully implemented the liquidity rules outlined by the Basel 3 agreements within the Basel Committee on Banking Supervision. These provisions have required credit institutions to adopt a governance system suitable for the management of liquidity risk and compliance with minimum liquidity constraints. These include the LCR (Liquidity Coverage Ratio) and NSFR (Net Stable Funding Ratio) indices which guarantee both a buffer of highly liquid assets to face periods of financial stress of 30 days, and the bank’s ability to withstand any crises over a 12-month time horizon. These thresholds, unlike in the USA, are applied without distinction to the entire banking landscape under the supervision of the ECB and the regulatory authorities. On the contrary, according to American regulations, liquidity constraints apply only to institutions meeting certain size requirements, which did not include Silicon Valley Bank, thus allowing it to take on much greater liquidity risks. In the face of onerous governance obligations and a more stringent scope of action for banking institutions, the European model therefore appears to be sheltered from similar threats.