Silicon Valley Bank (UK)

[cojak]

Deregulation in US allowed them to avoid marking bonds go market prices (ie show losses) because they were “small bank” and opted to keep bonds till maturity, so no losses in theory until they were forced to sell them and take them losses.

I get the feeling tho that they are unlikely to have just gov bonds - could be some other tulip that will have far bigger discount if sold

Yep, the CEO pressured the Trump administration to let some of the 2008 regulation go.

[AtW]

You should know who you’re banking with and what they’re doing with your money, and you should diversify too..

In US this bank required covenant to only use it in case loan from it was taken and many VCs apparently had it on their term sheets, such tulip should be illegal.

[AtW]

They were forced to sell Govt bonds with reported 10% loss, but they obviously FiRST sold whatever bonds resulted in lowest loss, which was enough to **** them over, question is whether remaining 150-200 bln of “assets” actually only 10% loss, seems unlikely to me…

[jamesbrown]

They were heavy in two areas, tech start-ups and VCs/private equity. It is literally the job of VCs to assess risk (and gain huge returns when they get it right). Hopefully, the gov't will stick with the terms of the FSCS, but provide short-term liquidity to avoid these companies going to the wall and have capital/jobs destroyed before other options can be explored. Anything more creates huge moral hazard and renders the FSCS pointless. Given that this bank is not systemic, it sends the message that all banks will ultimately have their losses socialised.

[jamesbrown]

They were forced to sell Govt bonds with reported 10% loss, but they obviously FiRST sold whatever bonds resulted in lowest loss, which was enough to **** them over, question is whether remaining 150-200 bln of “assets” actually only 10% loss, seems unlikely to me…

The context was more important than the details here. It's the bank run that killed them. The problem with any niche, like the US tech bubble/VC niche, is that it behaves like a herd - they all panicked at once. Remember, crypto banks are going tits up all over the place and many of these tech VCs are deep in crypto too. Likewise for the UK subsidiary, which is isolated from the mothership - the only reason that has gone under is that depositors panicked.

[AtW]

Crypto banks going tits up - Govt approves
Banks that bought govt treasuries going tits up due to bank run spooked by losses on said treasuries - not so good for Govt

Bank run needs to be stopped - 100% of all deposits must be guaranteed everywhere, or at least 90% above some big sum - £1 mln at least

If this isn’t stopped tomorrow then it will leas to business splitting their deposits even from “safe” banks, something that is frankly should be normal, but opening business account these days is more pain in arse than a prostate exam

[AtW]

“Yellen says government will help SVB depositors but rules out bailout

Treasury secretary says policies being formulated to stem fallout of tech lender’s collapse”

https://www.ft.com/content/6a77d81b-...2-3336af04d04b

[jamesbrown]

Crypto banks going tits up - Govt approves
Banks that bought govt treasuries going tits up - not so good for Govt

Bank run needs to be stopped - 100% of all deposits must be guaranteed everywhere, or at least 90% above some big sum - £1 mln at least

Nope, the moral hazard absolutely isn't worth it in the long run and it also doesn't guarantee that contagion won't happen in the current climate. The FSCS needs to be respected. It probably won't be respected because the "tech sector" sounds "good for growth" and this gov't is weak, but if the ideas are good, they have a good chance of of attracting new funding, given immediate cashflow support. Much better in the long run to avoid casino banking with taxpayer's money.

[jamesbrown]

“Yellen says government will help SVB depositors but rules out bailout

Treasury secretary says policies being formulated to stem fallout of tech lender’s collapse”

https://www.ft.com/content/6a77d81b-...2-3336af04d04b

No chance of bailing out owners and shareholders post 2008. But will they bailout depositors? Hopefully not beyond the agreed limits of FDIC and FSCS...

[AtW]

Bank that this bank is not systemic, it sends the message that all banks will ultimately have their losses socialised.

So 100% even huge deposits are totally safe in systemic banks, but anything less - only pathetic £85k regardless of company size?

There wont be “non-systemic” banks then