More and more the analysts are blaming the central banks for this bank run because they left interest rates too low for too long and lulled the financial institutions into thinking that ultra low interest rates would persist, then they raised them much too quickly and now the bodies are appearing.
You can't really blame it on SVB or even Credit Suisse because these were just the weak links. Everyone one in the financial industry owes money and is owed money by others. If you allow them to be picked off one by one we'll then it will bring down Everyone because it is all based on confidence.
This is the price we are now paying along with inflation for having ultra cheap money for way too long
I've some sympathy for central banks. They are primarily interested in keeping inflation low (but positive). Deflation is like poison to a central bank. There's not a lot they can do to stop it once it gets a foothold. Despite all the money they pumped out there was no sign of inflation taking off in the decade after the financial crisis. They were effectively printing money to stand still. The greater risk was always deflation.
Look at the recent past, a pandemic and the associated global shutdown with a war in Europe fast on its heels. The last 3 years have been anything but normal. I don't believe anyone was lulled into anything the central banks didn't have a crystal ball to say this would happen, no-one not even them foresaw the chain of events.
Would you have done it differently if you knew where we'd be today, possibility but I would imagine at almost every point over the last 10 years it was hard to argue with the stance they took. Act too soon and you might have tipped us into deflation. We might have been in a worse state going into the pandemic and we would still have had the inflationary effects of the war in Ukraine. So we'd have all been slightly worse off but we might have helped 3 or 4 banks....
Turning to the banks should we let poorly run banks effectively determine the pace of interest rate increases? A bank failure isn't good but neither is persistently high inflation. Likewise keeping a bad bank on life support indefinitely doesn't strengthen the banking system. Sometimes you've got to pull the plug.
As in any industry the stronger banks will survive and the poorly run banks will go under. Banks are not carbon copies of each other they all pick a slightly different business model and run with it. Can you blame the bank for is woes? Yes that all have risk management units. SVB was not your typical bank and it's their job to know the risks they face so they do have to take most of the blame. As for Credit Suisse it looks like everything they went near in the last couple of years collapsed in some shape or form. They took the risks and they didn't pay off. Not sure interest rates had much to do with their collapse more like the market got tired of waiting for them to turn it around and there were one too many missteps for markets to put up with.
Could policy makers have done more? In America it seems the answer is yes.. they had one rule for the big banks and another for the "smaller" ones. It sounds like a big bank would not have been allowed to do what svb did. Now we are seeing a flight to safety with depositors moving their money from the smaller banks to the larger, better regulated, banks.