Was going to post this on the blockchain thread but I guess it has implications that go slightly beyond that also gonna have to be…slightly careful here because I guess I’m tangentially connected but anyone tracking the story of what could be one of the largest banking collapses since 2008?
Looks like in the UK SVB UK already has a buyer
FDIC already appeared to have taken the step to guarantee all deposits (not just customer deposits)
I read an article recently which said in passing that banks going bump occasionally is a good thing. I’ve got a very small brain, but I wondered if someone could expand on why that’s the case, if indeed it is?
The argument I’ve seen being made is entities like SVB relied on a balance book that was structured in a way that was premised on historically low interest rates remaining low and was over exposed to tech firms and other entities capital funding requirements, securities and other slightly more volatile but high yielding assets.
It’s not necessarily a bad thing that rather than doing this financial institutions are pressured to structure their liabilities in such a way that is resilient against defaults, interest rate rises, bank runs, etc and engage in responsible lending practices. The problem is for customers including retail customers it’s quite difficult to ascertain which banks are doing this.
I wouldn’t say they necessarily engineered it but there’s substantial evidence that one of the reasons the collapse happened so quickly is because word spread quickly through communications platforms like slack and/or whatsapp
Even when the value of the shares were sliding SVB still had around $17 bn cash on hand so chances are there wouldn’t have been an immediate issue with firms trying to make payroll etc, but from what articles like this one were saying the sum total of withdrawals was around 42 bn simply because of depositors moving money around.
I don’t really see how the run was engineered any more than any bank run is engineered - people here rumours, tell other people, individually start making withdrawals as the rational thing to do, but everyone doing that in a collective panic causes the run.
Bear in mind my knowledge of bank runs is based on Mary Poppins.