Assessing The Impact Of Financial Reporting On Banking Stability: Insights From The 2023 US Banking Sector Turmoil

Abstract

The 2023 banking turmoil led to a great inquiry on the financial reporting models and regulations in the US banking system. The US has experienced instances of banking crises, often occasioned by economic downturns. The fall of Silicon Valley Bank, which was the first bank to face closure in 2023, opened up to an address on oversight and regulatory needs of banking institutions. This report highlights the role of financial reporting in the fall of the bank, distinctively categorizing the lack of risk assessments and full disclosure on banking assets as a major reason for the fall of the bank. The report suggests that further disclosures should be made by banks, documenting anticipated risks in their investments and approaches that have to be used to secure and enable sustainable management of unforeseen circumstances. Notably, the banking crisis in 2023, triggered by hikes in interest rates and losses by the banks opened up to more demands for regulatory supervision and protection of customer interests in addressing banking investments.