> The alternatives may include a capital raise, the sources said, which could dilute current shareholders. A sale of the bank is also a possibility.
This is why we need to stay very very strong on the "no help for shareholders" policy when banks fail. The potential for moral hazard is extreme otherwise.
See SVB's stock price in the last few years. The signal is clear to banking execs: take on risk, show growth metrics, and the stock market will reward you.
If your salary is tied to stock price, and whatever risky behavior you adopt won't show up for years, you have no real incentive to play nice.
Banking execs are not going to stick around at the same bank forever. Do a 3 year tenure, pump up the stock, get paid, and gtfo with someone else left holding the bag.
This is why we need to stay very very strong on the "no help for shareholders" policy when banks fail. The potential for moral hazard is extreme otherwise.