Silicon Valley Bank (UK)

[jamesbrown]

The US mothership sunk late last week:

https://edition.cnn.com/2023/03/10/i...ank/index.html

The UK bank (separate, ringfenced) went under late Friday:

https://www.bankofengland.co.uk/news...valley-bank-uk

Will be interesting to see how the UK gov't responds to this. Many UK tech startups are going to the wall early next week unless they intervene with cashflow to help payroll etc.

https://www.theguardian.com/business...valley-bank-uk

Then there's a question of a bailout. There will be political pressure in both directions, but banking with crappy banks should have consequences IMHO. Then there's the contagion risk - 2008 didn't look like 2008 to begin with (although, admittedly, this doesn't look systematic, beyond the startup tech sector, perhaps).

Surprisingly little coverage in the news.

[Fraidycat]

Then there's the contagion risk.. admittedly, this doesn't look systematic.

This wont be the last big company to fail this year, you cant just raise rates to 5% after keeping them near 0% for 13 years and not expect widespread failures.

These guys loaded up on bonds when interest rates were low and got wiped out when interest rates went up. The Risk Manager at the bank was a diversity hire.

They say there is a 6 to 18 month lag between raising rates and the impact of those rate rises on the economy, the next 18 months could get nasty because they haven't even finished raising rates yet.

Time to batten down the hatches...

[jamesbrown]

Yup, they couldn't lend out the money coming in so they purchased long-dated Treasuries and took a big hit when rates increased (prices moving inversely to rates as they do), everyone noticed and started to panic, bank run, they didn't have the liquid funds to cover it.

The situation with the UK bank was completely different and still it went under as the panic set in. I expect the UK gov't/HMT will issue some calming words, "whatever it takes" before the weekend is out, but will it be enough? Hard to say when panic sets in and investors look for banks with similar risks.

[Fraidycat]

Woke head of 'risk assessment' at Silicon Valley Bank 'prioritized' LGBT initiatives - including organizing a month-long Pride campaign - before bank lost BILLIONS and collapsed

A head of risk assessment at the beleaguered Silicon Valley Bank has been accused of prioritizing pro-diversity initiatives over her actual role after the firm imploded on Friday.

Jay Ersapah - who describes herself as a 'queer person of color from a working-class background' - organized a host of LGBTQ initiatives including a month-long Pride campaign and implemented 'safe space' catch-ups for staff.

[WTFH]

Woke head of 'risk assessment' at Silicon Valley Bank 'prioritized' LGBT initiatives - including organizing a month-long Pride campaign - before bank lost BILLIONS and collapsed

A head of risk assessment at the beleaguered Silicon Valley Bank has been accused of prioritizing pro-diversity initiatives over her actual role after the firm imploded on Friday.

Jay Ersapah - who describes herself as a 'queer person of color from a working-class background' - organized a host of LGBTQ initiatives including a month-long Pride campaign and implemented 'safe space' catch-ups for staff.

That’s an interesting story which managed, unsurprisingly, to trigger you.
The latest one in the Wail says that they hadn’t had a head of risk assessment for 9 months, and that Jay Ersapah worked for the Europe/UK/Africa division, not the US one, but was nothing to do with risk assessment

Almost like they wrote your story, then realised they’d made most of it up, so wrote a new one.
And yet people lap up the Wail as a reliable source.

[AtW]

100% of deposits should be insured, only way to stop panic.

In US bank they supposedly lost 10% on bonds, so in theory worst case scenario should be 10% haircut on deposits over 250k (which in this case most of them), but if they want to stop panic and subsequent outflow from other banks for diversification purposes then 100% should be covered - it was a licensed bank with regulators sleeping at their job as usual.

[churchillsnip]

Staggering really - loaded up on bonds IN 2021!!!??? - if they didn't see the writing on the wall at that point, then they deserved to fail. It was clear to smart players in the market that the level of government spending would result in higher inflation and therefore higher interest rates. Can only assume the bank trusted the downplay of inflation by central banks/politicians.

[AtW]

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

[jamesbrown]

Gov’t “working at pace” to support depositors with cashflow, which is fine and sensible. Investors should lose their shirts. Depositors over £85k should probably lose their shirts too if the FSCS is to mean anything. There is always a contagion risk when a bank fails. You should know who you’re banking with and what they’re doing with your money, and you should diversify too. Life lesson.

[ladymuck]

Saw it reported in the Torygraph and the Beeb managed to find space on the radio news to mention it in passing.