Silicon Valley Bank (UK)

[jamesbrown]

Sounds like they will help with cashflow, which is good - no sense in destroying capital for lack of immediate cashflow:

https://twitter.com/MrHarryCole/stat...11991302348802

But very vague about further help - that should come from the markets, not taxpayers.

[AtW]

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...

Depositors should be fully bailed out, or say 10% hair cut, which in case of US bank it might be easy IF total bond losses are in 10% region

[AtW]

Sounds like they will help with cashflow, which is good - no sense in destroying capital for lack of immediate cashflow:

https://twitter.com/MrHarryCole/stat...11991302348802

But very vague about further help - that should come from the markets, not taxpayers.

Key part is this down in tweet thread -

“Concerns growing that other smaller banks will now see raids tomorrow as firms seek to diversify their deposits... ”

No bailout for depositors = bank runs elsewhere

People will now be pulling term deposits (if they are allowed by terms)

[jamesbrown]

Key part is this down in tweet thread -

“Concerns growing that other smaller banks will now see raids tomorrow as firms seek to diversify their deposits... ”

No bailout for depositors = bank runs elsewhee

Er, yes, the key phrase being "diversify their deposits". That is absolutely what they should've done . if you bailout depositors now, there is literally no incentive to behave responsibly and know your bank, which is why it absolutely should not happen. The moral hazard is enormous.

[AtW]

Er, yes, the key phrase being "diversify their deposits". That is absolutely what they should've done . if you bailout depositors now, there is literally no incentive to behave responsibly and know your bank, which is why it absolutely should not happen. The moral hazard is enormous.

What would happen when everyone starts “diversifying deposits” on Monday with 0% left in “non-systemic” banks?

[jamesbrown]

What would happen when everyone starts “diversifying deposits” on Monday with 0% left in “non-systemic” banks?

Why 0%? That's the entire purpose of the FSCS/FDIC. Anything above that is "at risk". Anyone thinking about "diversifying deposits" on Monday needs the lesson they're about to learn because they are morons. I get the argument about avoiding contagion and not doing more damage than necessary, but some damage is necessary here and contagion is a very hard thing to avoid. It probably won't be avoided even if the FDIC/FSCS is ignored.

In any case, tech start-ups don't have abundant cash. If they do, it's VC cash. It's nuts to argue that VCs should be bailed out by the taxpayer. Assistance with cashflow is more than enough taxpayer exposure, the markets can deal with the rest, otherwise we don't realistically have markets, rather a gov't-backed casino.

[Protagoras]

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

FDIC cover is $250k, rather better than the level of UK protection.

[AtW]

It’s not VC cash if it was invested into companies - it belongs to those companies

All deposits should be 100% guaranteed without this 85k stupid limit - banks are regulated by Govt and it’s Govts job to ensure that depositors are 100% safe

It’s not worth risking financial stability over 2 bln in deposits that are allegedly in SVB UK - US got far bigger issue with 200 bln at stake, but 2 bln is no brainer

I fully expect UK Govt to totally fook it up

[jamesbrown]

It’s not VC cash if it was invested into companies - it belongs to those companies

All deposits should be 100% guaranteed without this 85k stupid limit - banks are regulated by Govt and it’s Govts job to ensure that depositors are 100% safe

It’s not worth risking financial stability over 2 bln in deposits that are allegedly in SVB UK - US got far bigger issue with 200 bln at stake, but 2 bln is no brainer

I fully expect UK Govt to totally fook it up

No, it's VC cash. If the gov't bails them out, it's the VCs that are protected. If the company is insolvent, the VCs cash is gone. That's the nature of investing. By all means, provide cashflow to see whether the company is still viable and, in that case, the VCs will simply take a (large) haircut.

It isn't £2bn that's at stake, it's the FSCS that's at stake.

[AtW]

It isn't £2bn that's at stake, it's the FSCS that's at stake.

It’s stability of the whole deposit system that is at stake - FSCS should not even exist, all deposits should be 100% guaranteed by Bank of England

P.S. Budget on Wed, unless they nip this in the bud and claim a one off (blame VCs who made firms open account in SVB)