Comment Re: Decision making that has little to do with log (Score 2) 233
Liquidity risk is absolutely a form of financial risk that any competent bank will track and manage, as is the market risk associated with any investment. SVB failed to manage the market risk associated with the rising interest rates and their effect on the market for bonds and mortgage-backed securities; that created the liquidity risk that they wouldn't be able to survive a run on the bank. A competent CRO would have noticed these risks and raised the red flag before the Fed got there; instead, SVB also created unnecessary regulatory risk by ignoring the Fed's warnings. By taking that regulatory risk, they wound up having sanctions against them that further limited their options.
Banking is risk management. Banks make money by betting on investments and betting that they can make loans that will be paid back. These risks are manageable, if one doesn't get greedy. SVB's management walked into the casino, went to the roulette table, and put it all on zero.