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What is the debt that they have bought for that quid?
What is the debt that they have bought for that quid?HSBC buys Silicon Valley Bank's UK business
HSBC Holdings PLC (LSE:HSBA) announced on Monday that its UK subsidiary, HSBC UK Bank, is acquiring Silicon Valley Bank UK for £1. Reports over the weekend...www.proactiveinvestors.co.uk
one pound ( quid ) doesn't sound confidence-building for *** there were a number of interested parties battling to buy the business ***What is the debt that they have bought for that quid?
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.Classic bank run.
Not only bonds, but MBS. Check out the numbers. And the average yields.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.
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.Not only bonds, but MBS. Check out the numbers. And the average yields.
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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.
Hence the problem of rapid rate rises.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.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.
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.
How The Dodd-Frank Act Protects Your Money
In the years that followed passage of the Dodd-Frank Act, the U.S. fully recovered from the economic crisis that inspired its creation and enjoyed the longest bull market in history. The financial crisis of 2007-2008 was one of the worst economic disasters in modern U.S. history, and it was in lawww.forbes.com
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.SVB employees were paid bonuses just hours before it was shut down. Hurrah.
sad but true
Classic corporate skullduggery.Classic bank run.
Classic corporate skullduggery.
SVB had no risk chief through much of 2022, proxy statement shows
Last year, Silicon Valley Bank’s risk committee doubled the number of meetings it held, suggesting board-level concern over the bank’s financial position.www.bankingdive.com
“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?”
Silicon Valley Bank crash is a red flag on rate risk
Investors need to look harder at vulnerabilities across the big banking marketswww.ft.com
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.
Disastrous Risk Management Is Not the Fed's Fault | Investing.com
Market Overview Analysis by Alfonso Peccatiello covering: United States 10-Year. Read Alfonso Peccatiello's latest article on Investing.comwww.investing.com
This means SVB was not applying basic risk management practices and exposing its investors and depositors to a gigantic amount of risk.
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