FirstFT: Fed prepares to tighten rules for midsized banks after SVB collapse

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First there was the market reaction to the collapse of Silicon Valley Bank, now regulators are preparing to respond. We also look at the potential buyers for some of SVB’s loan portfolio and Martin Wolf delivers his verdict on the debacle.

Here’s what else to keep tabs on today:

  • Economic data: The US commerce department will release February’s producer price index, and its monthly retail sales report is also published.

  • Regulation: The US Securities and Exchange Commission will vote on proposals including a new rule on cyber security risk management for the likes of broker-dealers, clearing agencies and investment advisers.

  • Results: Software group Adobe is scheduled to report first-quarter results.

Join our journalists and guests for an FT subscriber-only webinar on the collapse of Silicon Valley Bank tomorrow at midday ET. Register for free here.

Today’s top news

1. The Federal Reserve is weighing tougher rules on capital and liquidity for midsized banks to avoid a repeat of SVB’s implosion. The review will focus on the requirements for smaller banks with between $100bn and $250bn in assets, a person familiar with the matter said yesterday. It will also assess the US central bank’s annual stress tests.

2. A Russian aircraft has struck an unmanned US drone over the Black Sea, American officials claim, in an incident they describe as a “reckless” action by Vladimir Putin’s military. A White House official called the Russian move “unsafe” and “unprofessional”.

3. The Federal Reserve’s dilemma over whether to press ahead with its campaign of raising interest rates after the failure of three banks in less than a week has been further complicated by yesterday’s strong inflation data. “They’re stuck between their inflation objectives and their financial stability objectives,” said one economist. Read more on the Fed’s options.

4. OpenAI has released GPT-4, its latest artificial intelligence model that it claims exhibits “human-level performance” on benchmarks such as the US bar exam, advanced placement tests and the SAT. The new model, which can be accessed via the $20 paid version of ChatGPT, can accept input of both text and, for the first time, images.

5. Argentina’s annual inflation has surged past 100 per cent for the first time since 1991. The surge in prices is a concern for the centre-left administration of President Alberto Fernández ahead of elections in October. Polls have consistently shown that inflation is a primary concern among Argentines, followed by corruption and poverty.

The Big Read

Since Bob Iger’s second term as Disney chief executive began in November one topic has dominated conversations as he considers how to turn around the world’s largest entertainment group: what to do with Hulu, the popular but complicated streaming service in which Disney owns a majority stake. The debate, which also includes the future of the ESPN sports network, gets to a bigger question: what kind of company should Disney be?

We’re also reading . . . 

Chart of the day

At the end of 2022, SVB had $151.6bn in uninsured domestic deposits against about $20bn in insured deposits. It also had substantial unrealised losses on its bond portfolio, as interest rates rose. Put these two things together, writes Martin Wolf, and a bank run became likely.

The impact of unrealised losses on Silicon Valley Bank was exceptionally large.  Chart showing Common equity tier 1 capital ratio compared with Common equity tier 1 capital ratio adjusted for unrealised losses on securities.

Take a break from the news

‘Wembymania’ has gripped France as the 19-year-old basketball phenomenon Victor Wembanyama prepares for a move to the National Basketball Association.

Victor Wembanyama is 7ft 3in tall, has an 8ft wingspan and currently plays in France’s top basketball league
Victor Wembanyama is 7ft 3in tall, has an 8ft wingspan and currently plays in France’s top basketball league

Additional contributions by Tee Zhuo and Emily Goldberg

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