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> They were flying blind. While the Fed raised interest rates, the bank seemingly moved forward without any risk assessments. Not having a CRO was unacceptable, without question. However, I don't know if having a CRO would have saved them. Lack of an officially appointed CRO does not imply lack of a functioning risk department, so it's not completely the same as "flying blind." Also, the CRO in a bank has a limited role. Decisions ultimately made by the CEO, after consulting the CRO as well as others such as the CFO and the Head of the Treasury department. Given the way the corporate politics and bank politics work, the CRO may have quite limited influence on decisions like how and when to raise new funding, and how much risk appetite to have for things like liquidity risk. > But that wasn't the issue. The issue was all the "dry powder" that the bank accumulated over the past year. Not really. The CEO really did inadvertently trigger an avoidable bank run. It wasn't simply the email, but also the decision to sell the HTM securities at a loss and raise equity publicly. The "dry powder" that had accumulated over the past year could have been handled in many different ways, they didn't have to buy 10 year Treasuries at a time when the risk was clearly that rates could rise due to persistent inflation and as the VC investment climate was cooling. The lowest risk option would have been to take the customer cash and deploy it in the secured overnight repo market while waiting a little bit to see what happens with inflation, the VC market, commercial real estate post-pandemic, etc., and dollar cost averaging any plans to purchase vast quantities of securities over years. |