Limits of bank regulation in financialised capitalism: lessons from the 2023 US banking crisis

Abstract

ABSTRACT In this article I argue that banks continuously build new business models in financialised capitalism. Market value of these business models is regularly calculated and reported to the investors by investment banking expertise. What the US banking regulators, in their ex-post analysis, declared as unsustainable business models in the three failed banks – Silicon Valley Bank, Signature Bank, and First Republic Bank – in the Spring of 2023, had been promoted by equity analyst expertise as value-maximising ‘niche’ bank business models serving the disruptive technology start-ups after the Covid pandemic. The article argues that bank regulators’ power is severely constrained in financialised capitalism where stock market valuations of banks and equity-based remuneration of the executives are out of regulatory reach. Therefore financial stability mandate of central banks is undermined with significant risk to the society when business models of banks are legitimised by a financialised valuation regime that prioritises shareholder value creation.