Two years ago, the US was on the brink of its most serious set of bank failures since the financial storm of 2008. A clutch of regional banks, some the size of Europe’s larger lenders, hit the skids, including Silicon Valley Bank, whose demise came close to sparking a full-blown crisis. SVB’s crash had several immediate causes. Its bond holdings were crumbling in value as US interest rates pushed higher. With just a few taps on an app, the bank’s spooked and interconnected tech customer base yanked out deposits at an unsustainable pace, leaving multimillionaires crying out for federal assistance. 

The swift crisis-cauterising skills regulators forged in the fire of 2008 helped avert a broader financial contagion. The grim episode should loom large in the minds of US President Donald Trump’s trigger-happy, anti-regulation financial sheriffs. After all, the US Federal Reserve identified the lighter supervisory burden placed on smaller banks like SVB in his first term in 2018 as a key ingredient in its failure.

The US’s byzantine maze of overlapping federal- and state-level financial regulators is indeed ripe for simplification and reform. The personnel shift at the most senior levels in Trump’s new administration, however, points to deregulation for its own sake, not an incisive efficiency drive. Holders of bank stocks are licking their lips. Bonus-hungry dealmakers reckon an impending bonfire of red tape will open up lucrative opportunities for lenders. But every serious banker knows that a haphazard cull of regulation risks storing up trouble for a later date.