Australian (ASX) Stock Market Forum

The collapse of Silicon Valley Bank

i saw hints of another US troubled bank Freedom Republic or similar

will be watching to see what gets bailed ( everyone or only selected folks )

am also watching for international ripples ( into various 'start-up companies ' )
 
What is the debt that they have bought for that quid?
one pound ( quid ) doesn't sound confidence-building for *** there were a number of interested parties battling to buy the business ***

were the others offering less than one pound , or was there some politics involved ??

will be watching HBSC in case they swallowed a poison pill
 
Classic bank run.
Yep, SVB made the mistake of taking large short term deposits from a relatively small customer base, and during the last couple of years bought long dated government bonds at low interest rates, and the short term value of those bonds has fallen due to rising interest rates.

It’s a perfectly sound strategy, provided all the depositors don’t want their cash back at the same time in the short term.

In a couple of years it wouldn’t have been an issue as the bond prices would have corrected as the dates got shorter.
 
Yep, SVB made the mistake of taking large short term deposits from a relatively small customer base, and during the last couple of years bought long dated government bonds at low interest rates, and the short term value of those bonds has fallen due to rising interest rates.
Not only bonds, but MBS. Check out the numbers. And the average yields.
Screenshot_20230314-083903_Outlook.jpg
As Ducati posted elsewhere, with risk free T bills in the high 4s, so why would a depositor leave money where the interest rate can only possibly be in the 1's.?

So, by the Thursday, SVB’s clients tried to withdraw $42 billion, which was about one quarter of its total deposits . Gonski.
 
Not only bonds, but MBS. Check out the numbers. And the average yields.
View attachment 154316
As Ducati posted elsewhere, with risk free T bills in the high 4s, so why would a depositor leave money where the interest rate can only possibly be in the 1's.?

So, by the Thursday, SVB’s clients tried to withdraw $42 billion, which was about one quarter of its total deposits . Gonski.
Yep, most T-bills and MBS 12 months ago would have been trading at coupon rates much lower than what’s available today, even I bought some 3 yr debt notes last year at 2.9% that would sell today at 6%. Provided the holder isn’t in a position to be a forced seller they will do ok, but if you have to sell them early you take a capital hit.

institutions with more patient capital won’t have an issue holding these longer dated securities, but obviously SVB has found their capital base is not as patient as they believed them to be.
 
Yep, most T-bills and MBS 12 months ago would have been trading at coupon rates much lower than what’s available today, even I bought some 3 yr debt notes last year at 2.9% that would sell today at 6%. Provided the holder isn’t in a position to be a forced seller they will do ok, but if you have to sell them early you take a capital hit.

institutions with more patient capital won’t have an issue holding these longer dated securities, but obviously SVB has found their capital base is not as patient as they believed them to be.

Are SVB depositors any different to other depositors?
All depositors would seek the highest rate possible. So if SVB (and other banks) can't pay then depositors are going to move.
 
Are SVB depositors any different to other depositors?
All depositors would seek the highest rate possible. So if SVB (and other banks) can't pay then depositors are going to move.
Hence the problem of rapid rate rises.
There was laziness in the system that's now getting its ar5e kicked.
 
Are SVB depositors any different to other depositors?
All depositors would seek the highest rate possible. So if SVB (and other banks) can't pay then depositors are going to move.
Like most banks, I assume SVB has many types of deposit holding accounts ranging from 0% interest for transaction accounts through to higher interest term deposits etc.

——————————

The whole business model of commercial banks is accumulating deposits at lower interest rates by providing security and flexibility to depositors and putting that cash to work at higher rates by buying or creating higher interest rate securities with less flexibility and more risk

The bank share holders put their capital at risk as a buffer in the system and in return earn money on the interest rate spread.
 
Able to pay their US employees for one.

Major financial institutions generally wouldn't lend to start ups is another. My thinking , and really this should be in another thread, is possibly SVB took on too much because of this.

Oddly the CEO and two of the Directors (former Republication staffers) supported the watering down of the Dodds-Frank Act so didn't have to undertake annual stress testing like the major banks do.

A recent article from Forbes on the history of the Dodds-Frank Act.


Some matters I came across after reading a few sites. I can get why a number of tech companies, including Australian/NZ based ones, would bank with SVB if majors would not deal with them. It makes sense to me for Venture capital companies to also do business with SVB on that basis. And if the flavour is tech, I see a reason why ordinary depositors would also bank with SVB. Provide support your favourite team.

We are strange beasts.
 
SVB employees were paid bonuses just hours before it was shut down. Hurrah.
Unfortunately for share holders, those payments were for work completed in prior years, the timing is almost irrelevant, because any payments owed to employees out rank shareholders in the wind up of the company, so would be paid anyway.
 
First Republic Bank is the latest to be in trouble. This is not looking good.:(

First Republic Bank shares plunge days after three other US banks collapse

Another bank is teetering on the edge of ruin just days after three massive banking institutions fell like dominoes, sending shockwaves across the world.

80aa1ce4-adfa-40ee-8f98-98880dac0adc.pngAlex Turner-Cohen
@AlexTurnerCohen

3 min read
March 14, 2023 - 9:23AM

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Aussie companies sucked into bank collapse

06dd67a0291bd3edc707a2a48daf95bc.jpg

‘Extraordinary’ decision after bank collapse

6e5e34d0e38b9616dcbda80e66f671f3.jpg

Another American bank collapses

Customers and investors appear to have lost faith in another US bank, just days after three banks sensationally collapsed in a move that sent shockwaves around the world.

Overnight, fears mounted for a regional bank based in San Francisco, First Republic Bank, with its shares tanking drastically.
First Republic Bank’s shares fell by 61.8 per cent on Monday, local time. The week before, its shares had been down 33 per cent.
At the time of writing, the bank had recovered slightly, down 50.55 per cent in the past 24 hours, currently trading at $US31.21 ($A46.81) per share, according to the New York Stock Exchange.

It follows a similar pattern of several other failed banks in recent days, with stocks plunging, leading to a liquidity crunch, sending the market into a meltdown.

Investors and customers are also panicked because a whopping 70 per cent of the deposits held with First Republic Bank are uninsured.
That’s above the industry norm, with medium-sized banks usually having around 55 per cent uninsured, Bank of America said in a note.
\https://www.news.com.au/finance/business/banking/first-republic-bank-shares-plunge-days-after-three-other-us-banks-collapse/news-story/8dc37270b7e41ff629e63b7fac4b681 :(
 
Bail-ineth approacheth.

I hope you are all satisfied with your brand-new shareholding in a worthless bank?
 
Classic bank run.
Classic corporate skullduggery.

“Legitimate questions … swirl about CEO Greg Becker selling $3.6 million of SVB stock just days before the proxy filing and capital raise disclosure,” said Barsky. “Other insider trades show the current CFO and CMO selling shares too. What did these executives and others anticipate? When did the insider selling really begin?”


Banks exist to take and manage liquidity, interest rate and credit risks. It is therefore stunning to hear that a US bank has just failed because it invested much of its swollen base of deposits, mostly redeemable at demand, into a long-term, held-to-maturity bond portfolio without any interest rate hedge.


This means SVB was not applying basic risk management practices and exposing its investors and depositors to a gigantic amount of risk.
 
Classic corporate skullduggery.

“Legitimate questions … swirl about CEO Greg Becker selling $3.6 million of SVB stock just days before the proxy filing and capital raise disclosure,” said Barsky. “Other insider trades show the current CFO and CMO selling shares too. What did these executives and others anticipate? When did the insider selling really begin?”


Banks exist to take and manage liquidity, interest rate and credit risks. It is therefore stunning to hear that a US bank has just failed because it invested much of its swollen base of deposits, mostly redeemable at demand, into a long-term, held-to-maturity bond portfolio without any interest rate hedge.


This means SVB was not applying basic risk management practices and exposing its investors and depositors to a gigantic amount of risk.

I hope they both get sued and charged. Skullduggery in spades A captain who hits the iceberg that he steered at should go down with the ship.

The CEO Greg Becker must be the biggest banking idiot in modern history.
He obviously has no understanding of risk! He was the one that led the charge to reduce the regulations.

I am astounded. We all know of people who get where they are because of connections, not brains, but this takes the cake. Pond scum.

 
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