Never Waste a Crisis: How Banks Should Respond to Silicon Valley Bank’s Collapse

Leadership StrategiesIndustry TrendsFinancial ServicesBoard and CEO AdvisoryExecutive SearchBoard Director and Chair Search
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Robert Voth
April 28, 2023
3 min read
Leadership StrategiesIndustry TrendsFinancial ServicesBoard and CEO AdvisoryExecutive SearchBoard Director and Chair Search
Executive Summary
Recent banking collapses highlight the need for action on leadership assessment and board construction. Banks must move now to address future challenges.


Seven weeks after the failure of Silicon Valley Bank, there continues to be an onslaught of analysis as to how one of the nation’s top banks could collapse so quickly. The amount of intellectual post mortem shouldn’t surprise; pundits and regulators thrive in reactionary environments where it’s easy to assign blame and armchair quarterback what management decisions should have taken place.

That’s not to say these insights aren’t valuable: they provide clarity to a public that is, once again, questioning the complexity and risk parameters of the US banking system. Some offer deep dives into the microeconomic forces that took SVB over the brink, while a smaller (but loud) subset bang the drum of increased regulations.


Unfortunately, these debates lose the most important common thread: leadership.

SVB’s board, ALCO, and executive team had access to mountains of data explaining how rising interest rates would challenge SVB’s balance sheet. Senior management had full insight into where deposits came from and what percentage were held above the $250,000 FDIC limit. Communications executives were in place to ensure the right messages were sent to investors . At every corner, within every seemingly complex web of decision making, the foundational cracks in the organization’s leadership were laid bare.

In hindsight, it’s easy to catalog where improvements in leadership were needed and what leadership should have done to prevent SVB’s collapse. But what lessons will the banking industry learn from their failure? The reactions Russell Reynolds Associates have observed to date have us concerned that banks are missing a prime opportunity to assess and improve their boards and key leadership roles.

Unfortunately, the banking industry has become extremely cautious since the collapse. The KBW Regional Banking Index has dropped more than 24%. Rising deposit rates drive higher net interest costs, tighter lending standards temper commercial loan flows, and economic forecasts continue to fluctuate. All of this leads to uncertainty—an emotion that boards, executive teams, and analysts all fear.

Uncertainty breeds inaction. At a time when banks must assess leadership and upgrade talent, most banks find themselves frozen, numbed by cost-cutting activities and clutching the mistaken safety blanket of time, waiting for economic and emotional tides to turn. The ostrich strategy is now in full force.

Banks must not stall their talent and leadership agendas. Recent studies found that, when asked about the top issues impacting organizational health, “availability of key talent / skills” is the leading concern across boards and C-suites. Additionally concerning: less than half of leaders report feeling prepared to address these talent challenges.


Leadership Implications


Leaders ranked availability of key talent / skills as the top external factors impacting business for 2023

When it comes to the availability (or lack thereof) of critical talent, most leaders feel vulnerable, with only...


Of leaders reporting their leadership team is prepared to address the challenges ahead



Source: Russell Reynolds Associates, Q4 2022 Global Leadership Monitor, n =1,690 global CEOs, C-suite leaders, next generation leaders, and non-executive board directors.


Banks can dedicate themselves to strengthened scenario planning, improved liquidity monitoring,  increased capital discipline, and operational rigor all they wish. But without the right leadership team, these initiatives ring hollow and often fail. Worse, these failures in management – which is exactly what they are – set banks further back as they weaken internal and external confidence.

Banks are predicting annual risk technology spend to increase 10% over the next few quarters. Increasing the sophistication of data analytics and AI to improve stress tests and real-time monitoring of risk is a multi-million dollar investment. However, our data shows that less than 30% of banking leaders feel they have the right technology executives to successfully implement these technologies and processes.

This talent gap leads to a nasty downward spiral. Investments in new technologies that fail to meet their stated objectives complicate and slow platforms already failing to meet customer expectations and heightened standard. This invites regulators to amplify the pressure to improve, and the cycle repeats itself.

Bank boards face similar challenges. According to a 2022 PwC survey of more than 700 public company directors in the US, nearly half of directors said at least one of their fellow directors needed to be replaced, with 20% of respondents looking to replace two. Less than half thought their peers had a strong grasp of cybersecurity.

One does not need a crystal ball to know what comes next. Government agencies will begin to implement overzealous and reactive proposals, offering regulatory prescriptions to cure illnesses already past.

Most banks will rush to comply and struggle to hire qualified compliance, risk, and technology executives, not to mention board members with the applicable experience to fill audit and risk committees. The war for talent will explode. Much like the beginning of 2010, executive talent will be sparse, expensive, and drive the market.


So, what can your bank do in response? Move now.

Jamie Dimon saw the need for first mover advantage in 2008 and built the industry’s top compliance and risk department at the dawn of the financial crisis. Dimon did not hesitate, and the rest of the industry spent years competing with each other to pick off his best risk and compliance executives at compensation packages far beyond JPMC’s initial build.

The end of 2023 and 2024 will surely see regulatory adjustments looking to address SVB’s and other’s failure points. The rush to hire executives qualified to meet these initiatives will be red ocean races. Demand will outstrip supply, and the cost of managing to these new regulatory expectations will be extreme.

Today’s depressed equity positions and lowered bonus expectations offer banks exceptional value when acquiring executive talent. A year from now, stock portfolios will have recovered and bonus targets reset, which will skyrocket talent acquisition costs.

At minimum, it takes two to three quarters to successfully recruit and onboard new board members. Banks must assess their boards and immediately recruit directors who possess the relevant and necessary range of experience to help guide banks through the current and upcoming tumult.

Bill Demchak, Chief Executive Officer of PNC (whose bank is headed towards a record year), summed up the situation perfectly: “These state chartered banks…had management that wasn’t up to the task. There were a handful of characters who frankly did the country a disservice.”

While it might feel counterintuitive, being aggressive and proactive in executive recruitment and board refreshment during a crisis is not contrarian – it is the exact right move. World-class organizations recognize fraught moments as opportunities and their executive acquisition strategies directly correlate to their continued success. Banks would be wise to follow suit.




Robert Voth co-leads Russell Reynolds Associates’ global Consumer & Commercial Financial Services Practice. He is based in Chicago.