We Need to Fix Supervision

In a recent column, Gillian Tett of the Financial Times laments that, fifteen years after the failure of Lehman Brothers, there are still significant deficiencies in banking supervision. She cites a recent IMF report, Good Supervision: Lessons From The Field. With many others, the IMF argues that the collapse of Silicon Valley Bank and forced sale of Credit Suisse earlier this year resulted from failures in risk management at firms. But it goes on to observe that this was compounded by flaccid supervisory oversight. 

“While there has been endless noise about capital and liquidity standards, there has been a woeful lack of attention paid to other realms of finance,” Tett’s column continues. Here, she quotes Agustín Carstens, General Manager of the Bank for International Settlements. “Banking supervision needs to up its game,” he recently argued. The question many are wrestling with now is precisely how this is to be achieved.