European regulators and policy experts are dismayed by how American watchdogs handled the collapse of Silicon Valley Bank last weekend.

Certain policymakers take issue with the Fed’s “systemic risk exception,” which they believe could undermine the credibility of banking globally. 

Critiques of the Bailout

According to the Financial Times, a senior eurozone official said the Federal Reserve showed “total and utter incompetence” in its response to SVB’s failure, turning its back on years of “long and boring meetings” crafting an international rulebook to end bank bailouts. 

While the Fed, Treasury Department, and FDIC insist that there was no “bailout,” critics say otherwise. While the agencies’ backstop plan did not reimburse bank investors or shareholders, depositors were made entirely whole – even those with deposits beyond the FDIC’s standard $250,000 insurance limit. 

This so-called “systemic risk exception” wasn’t met well by man experts across the Atlantic. “This is the US version of the small Venetian banks,” said a French policy expert in reference to Monte dei Paschi, an Italian bank that’s continued to struggle despite years of liquidity injections and support. “You are always systemic for somebody.”

Nicolas Véron, regulation expert at the Peterson Institute, said it was “very questionable” to label SVB as a “systemic risk,” and could set a dangerous precedent. 

A European regulator also criticized the US regulators’ claim that its bailout would not be borne by the taxpayer. “At the end of the day, this is a bailout paid for by the ordinary people and it’s a bailout of the rich venture capitalists which is really wrong,” he said.

At home, House Financial Services Committee Chair Patrick McHenry publicly