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Message
Silicon Bank Failure - this is what happened
Posted on 3/13/23 at 11:30 am
Posted on 3/13/23 at 11:30 am
using round easy to understand number / assume % are round values = $100
Average Bank Balance Sheet
25% bonds 75% loans and capital ratio (asset - liabilities) of 9%
right now banks have unrealized losses of around 12% / so value of securities is .88*25 = 22 or 3$ loss that reduces capital to 6% if realized
SVB was 60% bonds 40% loans and had a unrealized loss of around 15% - so .85*60 = 51 / or 9$ loss - assuming 9% initial capital and the equity is 0
this info has been public for a long time, but when they sold some bonds idiots the info was highlighted to some of their uninsured depositors which caused a bank run
Average Bank Balance Sheet
25% bonds 75% loans and capital ratio (asset - liabilities) of 9%
right now banks have unrealized losses of around 12% / so value of securities is .88*25 = 22 or 3$ loss that reduces capital to 6% if realized
SVB was 60% bonds 40% loans and had a unrealized loss of around 15% - so .85*60 = 51 / or 9$ loss - assuming 9% initial capital and the equity is 0
this info has been public for a long time, but when they sold some bonds idiots the info was highlighted to some of their uninsured depositors which caused a bank run
6
Posted on 3/13/23 at 11:33 am to hubreb
And now the big banks are licking their chops
Posted on 3/13/23 at 11:55 am to hubreb
The slow moving train wreck started last year when young VC-funded companies couldn't raise any more rounds, so they actually had to start drawing on deposits from SVB for funding. This was all tracked in the open by people who follow the sector.
Coming into March, they had about $18B in TCE. They ended up needing to sell some of their ill-purchased securities portfolio in order to keep things right. This was "only" a $2B loss, but it caused them to attempt to raise some more equity. Nobody took that deal which appears to have sparked the real panic.
Coming into March, they had about $18B in TCE. They ended up needing to sell some of their ill-purchased securities portfolio in order to keep things right. This was "only" a $2B loss, but it caused them to attempt to raise some more equity. Nobody took that deal which appears to have sparked the real panic.
Posted on 3/13/23 at 12:01 pm to Big Scrub TX
their TCE has been near negative for a few qtrs
Posted on 3/13/23 at 1:19 pm to hubreb
Posted on 3/13/23 at 1:28 pm to hubreb
Another aspect of this is the speed of which info travels
Silicon bank has a lot of well connected customers and once the concerns started airing, the word traveled fast through the social media and other communication channels out there.
This created a run which could hurt any bank in the country.
Silicon bank has a lot of well connected customers and once the concerns started airing, the word traveled fast through the social media and other communication channels out there.
This created a run which could hurt any bank in the country.
Posted on 3/13/23 at 1:38 pm to SlidellCajun
quote:
Another aspect of this is the speed of which info travels
Silicon bank has a lot of well connected customers and once the concerns started airing, the word traveled fast through the social media and other communication channels out there.
This created a run which could hurt any bank in the country.
the thing about it is that the info has been out there for a long time
SVB HTM bond holdings
cost basis
Dec '22 Sept '22 Dec '21
91,321 93,286 98,195
Market Value
Dec '22 Sept '22 Dec '21
76,169 77,370 97,227
Loss
Dec '22 Sept '22 Dec '21
15,152 15,916 968
Equity not taking into account those marks
Dec '22 Sept '22 Dec '21
16,295 15,810 16,609
Posted on 3/13/23 at 1:54 pm to hubreb
quote:
this info has been public for a long time, but when they sold some bonds idiots the info was highlighted to some of their uninsured depositors which caused a bank run
They had a not great balance sheet but simply having those unrealized losses on their bond portfolio did not mean a bank failure was imminient.
But people freaked out when SVB issued financials and said essentially "we need capital ASAP to clean up the balance sheet" and that spurred a bank run. To deal with that, the bank had to realize some of those losses, and that was game over.
Banking is a precarious balance of managing cash inflows and cash outflows. When that gets out of whack, things go bad in a hurry.
Posted on 3/13/23 at 1:55 pm to hubreb
quote:
the thing about it is that the info has been out there for a long time
I think the capital call is what spooked people, leading to the run on deposits. Becuase you are right, the crappy balance sheet was known for a while.
Posted on 3/13/23 at 2:06 pm to LSUFanHouston
quote:
They had a not great balance sheet but simply having those unrealized losses on their bond portfolio did not mean a bank failure was imminient.
they had way worse than a "not great" balance sheet - it was an epic disaster...there is not another large bank that has the amound of bonds they do as a percentage of assets - that is normally only seen in tiny community banks w/ zero loan demand
Posted on 3/13/23 at 2:14 pm to hubreb
quote:
they had way worse than a "not great" balance sheet - it was an epic disaster...there is not another large bank that has the amound of bonds they do as a percentage of assets - that is normally only seen in tiny community banks w/ zero loan demand
Sorry you missed my sarcasm.
Point being... that's been known for a while now. The bank collapsed in 24 hours.
Posted on 3/13/23 at 4:08 pm to LSUFanHouston
[img]SVB had NO head of 'risk assessment' for nine months before it collapsed... as woke boss for Europe, Middle East and Africa was busy organizing a month-long Pride campaign and a 'Lesbian Visibility Day' By Helena Kelly For Dailymail.Com 16:28 EDT 11 Mar 2023 , updated 14:55 EDT 13 Mar 2023[/img]
Posted on 3/13/23 at 5:46 pm to hubreb
This was a state chartered bank. Where were the Cali regulators in all this?
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