[HN Gopher] First Republic, other regional bank stocks sink afte...
___________________________________________________________________
First Republic, other regional bank stocks sink after failure of
SVB
Author : rbanffy
Score : 109 points
Date : 2023-03-12 12:10 UTC (10 hours ago)
(HTM) web link (www.cnbc.com)
(TXT) w3m dump (www.cnbc.com)
| coldcode wrote:
| Most banks do not have most of their capital tied up for ten
| years; SVB had to sell their treasuries before the ten years at a
| loss. The only thing tying other banks who don't do that to SVB
| is random fear of a bank run.
| mikeyouse wrote:
| If I'm a treasurer at a small firm, I'm just going to move my
| funds to the biggest bank I can find. Who has the time or
| energy to spend interrogating the asset mix and bond duration
| of the bank with your checking account?
| bigbillheck wrote:
| > I'm just going to move my funds to the biggest bank I can
| find.
|
| Why would 2023 lead to you do that if 2008 had not?
| mikeyouse wrote:
| It felt like there was a distinction between the community
| bank with a few billion under management and banks like SVB
| with hundreds of billions under management. SVB-sized banks
| felt "safe" post-2008, apparently they're not.
| paulddraper wrote:
| Washington Mutual was bigger then SVB, even ignoring
| inflation
| JumpCrisscross wrote:
| > _SVB-sized banks felt "safe" post-2008, apparently
| they're not_
|
| I don't think SVB has ever had an investment-grade (EDIT:
| issuer) credit rating. Certainly not in the last year.
| mikeyouse wrote:
| It sure did, every part of their business was investment
| grade and as of last week it was rated A by Moodys.
|
| https://ir.svb.com/shareholder-and-bondholder-
| information/cr...
| JumpCrisscross wrote:
| Sorry, flubbed. They were medium risk, not junk, but
| borderline investment.
| prepend wrote:
| > Who has the time or energy to spend interrogating the asset
| mix and bond duration of the bank with your checking account?
|
| The treasurer should have time as that's part of her job.
| mikeyouse wrote:
| Just not remotely feasible. How many companies have
| dedicated treasury functions? It's almost always part of
| the role/responsibilities of a CFO or VP Finance until much
| larger than the companies in question here. People have
| really odd ideas about what corporate finance roles entail.
| shkkmo wrote:
| Or better yet, keep less than 250k at each institution.
| mikeyouse wrote:
| The amount of coordination / bank reconciliation / overhead
| that would add is absolutely not worth it. It's completely
| normal to have $10M+ in cash in a checking account for
| these companies, if I need to make payroll of $500k twice
| per month + pay vendors, accounts will necessarily have
| much more than the FDIC limit.
|
| I could find 40 community banks and shift funds around
| constantly or I could just put it all in JPM and actually
| worry about running my business.
| makestuff wrote:
| Also the big banks will do overnight sweeps as well to
| protect customers over the FDIC limit. I'm not sure if
| smaller banks do this as well, but I know JPM will do it
| for large customers. From the brokerage side interactive
| brokers will do it on any cash sitting in your account as
| well if you opt in.
| scottLobster wrote:
| Or you could split it between two banks and reduce your
| exposure by half. Four banks and you reduce it by 75%.
| That way a deathblow turns into a setback, and overhead
| is minimal. There are cash management services that will
| do this for you if you can't be personally bothered.
|
| Running a business means doing the maintenance keeping
| ship afloat as well as charting a course to exotic
| destinations.
| mikeyouse wrote:
| Those probabilities assume there's an equal likelihood of
| going under for each bank which certainly isn't true. I
| could just move it to half at WFB and half at JPM and cut
| my risk by substantially more than spreading it across
| random community banks.
| gnicholas wrote:
| If I split between SVB and FRB, have I reduced my
| exposure by half? I agree with GP that using a too-big-
| to-fail bank seems to be the more practical option.
| adastra22 wrote:
| This is HN. Who else had a funding term sheet which
| required the ongoing and exclusive use of SVB for deposits?
| I did.
| gnicholas wrote:
| Wow. What was the putative reason for this clause? It's
| interesting that a VC would have such a strong incentive
| to pressure portfolio companies to keep their money at
| one specific bank.
| luckylion wrote:
| Invested in the bank? Got a sweet personal deal with the
| bank in return for pinning their investments to the bank?
|
| It certainly sounds like they had some side-things going
| on, otherwise hard to believe they'd not just recommend
| fiscally unsound practices to their portfolio companies,
| but even require them to.
| gnicholas wrote:
| If practices like these are widespread, it could explain
| why some VCs are pushing hard for a government backstop.
| It would be embarrassing to them if these clauses came to
| light, and they could arguably be on the hook for damages
| in lawsuits by shareholders of their portfolio companies.
| BadCookie wrote:
| It also seems possible that some VCs have their personal
| funds tied up in SVB.
| adastra22 wrote:
| A LOT of them do. And late-stage founders as well. You
| know how people like Elon cash out their shares via
| collateralized loans? What bank do you think processes
| those loans? And SVB really didn't like to be
| transactional--they work hard to make sure your SVB
| collateralized loan is linked to a SVB checking account
| and a SVB founder-shares-backed mortgage for your 5,000
| sqft mansion in Los Altos Hills.
| adastra22 wrote:
| It's indirect and, I think, unintentional on the VC's
| part. The VC required closing via wire to a SVB account,
| and that a SVB deposit account be maintained to assist in
| further financing rounds, bridge loans, and other things.
| Separately, SVB required an exclusive depositing
| relationship when signing up with them for commercial
| bank services. It's the SVB side of this that I have
| issue with, really. No fault of the VC that they wanted a
| shared banking relationship, but that bank should not
| have been allowed to prohibit us from using other banks
| for deposit services.
|
| TL;DR: If we went with that VC for the Series A, they
| wanted us to be a SVB customer, and SVB demanded
| exclusivity.
| LatteLazy wrote:
| Are there any figures on "weighted average maturity" of bond
| holdings of banks? That seems like a key health indicator right
| now...
| nullc wrote:
| > Most banks do not have most of their capital tied up for ten
| years;
|
| {{Citation needed}}
|
| Why would SVB be particularly special with respect to
| investments? They were all sharing the yield environment the
| the current effects of recent monetary policy.
| nullc wrote:
| Answering myself, JPmorgan at least says SVB's asset mix was
| different: https://am.jpmorgan.com/content/dam/jpm-am-
| aem/global/en/ins...
| LatteLazy wrote:
| Ah, the age old question: is it cheaper to bailout (to one degree
| or another) 1 bank or watch 9 more fail because they're in the
| same position but the run hasn't started yet...
|
| I wonder how much this outcome was foreseen and discussed by the
| fed when they went into full rate rise mode.
| joseftexas wrote:
| [flagged]
| zhte415 wrote:
| Is it cheaper to let 9 more fail or give the green light to
| moral hazard for hundreds or thousands more?
| LatteLazy wrote:
| Well we should really not rely on morality, we should have
| regulation instead. Otherwise letting bankers gamble away
| depositors money is not really any better than letting them
| do it with taxpayer's money. And people will stop using all
| banks, even honest ones...
| nullc wrote:
| Whats the moral hazard here? Every bank is illiquid if pushed
| hard enough.
| JumpCrisscross wrote:
| SVB wasn't illiquid. They were insolvent, as declared by
| their regulators. If they were simply illiquid, they could
| have borrowed at the Fed's discount window.
| auntienomen wrote:
| To be fair, the bank run is what made SVB insolvent.
| Prior to that, all they had was a liquidity problem. A
| rather big one, but if depositors hadn't bailed, SVB
| would just have had subpar growth for a few years.
| JumpCrisscross wrote:
| > _the bank run is what made SVB insolvent. Prior to
| that, all they had was a liquidity problem._
|
| The bank run _exposed_ the insolvency. But it was already
| there. That's why SVB couldn't solve their problems at
| the Fed's discount window.
|
| SVB lobbied for exemption from the Fed's stress tests and
| Basel III that would have prevented this problem. The
| policy treatment is rolling back those changes so
| regional banks are covered.
| photonbeam wrote:
| Can I just open a bank account at the federal reserve directly
| rather than worrying about bank failure?
| paxys wrote:
| No but you can buy government bonds.
| neon_electro wrote:
| Would be nice if we could open an account at the local post
| office: https://en.wikipedia.org/wiki/Postal_savings_system
| dexter0 wrote:
| In time.
| anon291 wrote:
| Recall that a dollar bill is a promise by the federal reserve
| to pay a dollar. There is no guarantee that that promise holds.
| aliljet wrote:
| It's interesting to see First Republic bank having this trouble.
| It seems clear (feel free to correct me) that they ALSO had
| massive loan portfolios at extremely low rates which have likely
| rapidly and seriously declined in value over longer terms. And
| it's likely they too were enjoying a deluge of deposits from the
| valley's success and are now seeing huge amounts of money drying
| up. I'm not saying the bank is bankrupt, but they too could
| easily end up in a liquidity crisis. In fact, I wonder if they
| already are heading in that direction...
| the_optimist wrote:
| This is FUD without analytic support. Loan portfolios are
| floating rate and pricing for loans has been stable. You need
| to look at interest rate exposure which is not in the loan
| portfolio.
| AYBABTME wrote:
| I would guess that FRB's loan portfolio is heavy on fixed
| rates. At least that's what the products they've sold looks
| like.
| snotrockets wrote:
| Products sold to customers may not be assets held.
| Schnitz wrote:
| It's not FUD. If the government sends the message that
| depositors will go down with the ship every bank that isn't
| considered too big to fail will see all their uninsured
| deposits start moving out. Many of them won't be able to meet
| their liquidity needs as a result and go into receivership.
| With every bank that goes into receivership the outflows will
| only accelerate. People will start to get worried about
| insured deposits as we hit the limits of what FDIC can cover
| and insured deposits will start to flow out and into
| systemically important banks as well, further accelerating
| the death spiral of all but the biggest banks. This isn't
| some made up scenario, start asking people that have
| underinsured depositors about their money movement plans.
| JumpCrisscross wrote:
| > _every bank that isn't considered too big to fail will
| see all their uninsured deposits start moving out_
|
| Small banks usually had to pay more for deposits and run
| conservative books for this reason.
| ouid wrote:
| I'm not sure i understand the difference here between "a
| liquidity crisis" and bankruptcy. people want to withdraw their
| deposits made at low interest rates and invest them with better
| yields.
|
| The banks have misrepresented their ability to pay out the
| current deposits.
| grey-area wrote:
| No bank in the world could pay out all its deposits
| immediately.
| jefftk wrote:
| It's a claim about what would happen given more time. Imagine
| I owe you a million dollars in cash, and also own a house
| that is probably worth about $1.5M. Houses are not very
| liquid: each transaction takes a lot of slow evaluation, you
| need to find the right person, etc. Best case for turning it
| into cash at close to its value is about a month, often takes
| a few months. So if I suddenly needed to pay back my loan to
| you we could say I'm in a liquidity crisis: given time to
| liquidate I'm good for it (my net worth is positive) but I
| don't have the cash on hand now.
|
| On the other hand, if the house is actually only worth $750k,
| then my issue is solvency. Even taking time to sell the house
| for as much as possible I won't have enough to pay everything
| I owe, and will need to go into bankruptcy. And we don't know
| for sure until I actually try hard to sell the house.
|
| People running into issues of solvency often say that they
| are running into a liquidity issue, however, through some mix
| of wishful thinking, hoping for self-fulfilling prophecies,
| and lying.
| jp_nc wrote:
| What's the news value of a two-day old article in a situation
| that has evolved a lot since then?
| perrygeo wrote:
| It's an article about stock prices. The US stock exchanges
| close at 4 p.m. Eastern time on Friday. Aside from opinions and
| speculation, what has changed re: First Republic's stock price
| since then?
| SigmundA wrote:
| So I see Ally may be at risk too, great I have savings there...
|
| Pretty scary to go from thinking you have a safe emergency fund
| regardless of the market to a potential bank run seemingly
| overnight.
|
| Wondering what tomorrow will look like and how many people are
| wait to transfer funds out of any at risk bank.
| drstewart wrote:
| No bail out! It's your own fault for! You shouldn't have taken
| such insane risks! You deserve to lose your money, that's
| capitalism in action! We shouldn't socialize your losses!
| [deleted]
| Mistletoe wrote:
| The gang finds out about fractional reserve banking.
| alexnewman wrote:
| Banks do not lend against deposits. Fractional reserve
| banking is not what we do
| reducesuffering wrote:
| Now this is a strange bank
| ninjazee124 wrote:
| If you have anything less than 250k in cash, it's silly to
| transfer it out
| gadflyinyoureye wrote:
| I was thinking to pull out my money. Maybe Redneck bank, but
| ultimately chose not to this morning. I have less thank 250k.
| I might pull out 40k for 4 week bills. But that's just for
| better interest while staying relatively liquid.
| sgerenser wrote:
| There hasn't been a reason to be in Ally for at least the
| past year or so, they've been WAY behind other banks in
| raising their rates along with the Fed rate hikes. Tons of
| competitors are offering 4-5% now on savings, and short-
| term T-Bills and money market funds are also above 4%.
| Ekaros wrote:
| There is risk of it being locked up for some period.
| Specially if the system gets busy and there is multiple banks
| failing at one time.
| mikeyouse wrote:
| Nah, FDIC-insured funds are available the next business day
| in every bank failure. Funds over the limit could be locked
| up but their primary goal is to make sure that $250k is
| ~immediately available.
| Ekaros wrote:
| Would that actually be case if a dozen banks failed in
| single day or a hundred? Does FDIC have enough man power
| to handle all of these banks at one time simultaneously?
| lbotos wrote:
| I suspect that's why they are offering 1.5-2x comp for
| SVB employees at the moment. They know the SVB systems.
| They are these power to get out of the situation.
|
| I imagine the same would happen in other situations.
| sgerenser wrote:
| What? AFAIK the FDIC just keeps paying employees as
| normal. Where'd you hear about 1.5-2x comp, except
| perhaps in the event they're hourly employees working
| overtime, which would just fall under normal overtime
| rules not some special FDIC bonus.
| mikeyouse wrote:
| Employees at SVB have roughly the same game theory
| decisions to stay or leave as depositors did. It costs
| nothing to leave right now and go work for a rival bank,
| but the last person out the door is going to have a very
| hard time... there are only a certain number of jobs /
| job opening for their roles so the FDIC did indeed offer
| a premium to keep them around.
|
| https://www.forbes.com/sites/jackkelly/2023/03/11/some-
| silic...
| adastra22 wrote:
| They are paying 1.5x for retention.
| mikeyouse wrote:
| Dozens of banks, very likely yes, hundreds - probably not
| the next day but the ability to resolve dozens should be
| enough to prevent hundreds from needing help.
| [deleted]
| SigmundA wrote:
| It may be irrational, but then irrational behavior is whats
| leads to bank runs.
|
| Why should I keep my money there if I can hit a few buttons
| and move it somewhere with less perceived risk? What if every
| one is thinking like that? Great FDIC will step in quickly, I
| hope.
|
| I think tomorrow will be interesting in general to see how
| things hold up.
| scott_w wrote:
| But is it irrational to take your money out if you think
| there might be a bank run? If I have a large amount of
| money to lose, I think I'd do the same!
| pyrophane wrote:
| What makes you say that, other than the fact that Ally is a
| smaller bank?
| SilverBirch wrote:
| What's really scary about the SVB situation is the dynamic that
| there's no cost to causing a bank run, so now you've got all
| these VC guys who are disingenuously claiming that every bank in
| America is now at risk because of SVB. We all know what they're
| doing - they're trying to create panic so that the government has
| to step in, but it's a massively dangerous game to be playing. If
| other regional banks do start failing it's going to be in no
| small part due to these people preaching doomsday scenarios. Will
| they pay a price for their behaviour. Of course not.
| BeFlatXIII wrote:
| How long until we have a 4chan-inspired bank run spill into
| real banks?
| emkemp wrote:
| DON"T GIVE THEM IDEAS.
| paulddraper wrote:
| What % is federally insured tho?
|
| For SVB it was tiny. I'm guessing other banks it is bigger but
| idk
| dsugarman wrote:
| It's 250k at every bank.
|
| The comment section on hn makes this seem like it was
| obviously risky to bank with svb but to everyone making
| treasury decisions, it looked to be the same as banking with
| any significantly old and significantly large bank. They are
| very large, publicly traded, regulated like everyone else,
| have their assets primarily in us treasuries and all fdic
| member banks have the same insurance policy.
|
| There really can be a run on other large banks, svbs balance
| sheet wasn't upside down unless you marked to market their
| hold to maturity assets. If people start withdrawing you have
| to sell those and you get exposed and all of the banks are
| holding us treasuries that are worth a lot less due to
| rapidly rising interest rates. If people start withdrawing
| from other banks they get exposed too.
| zug_zug wrote:
| Maybe the standard banking model is broken. Banks offer a
| theoretical guarantee of the ability withdraw your money at any
| time and then just _hope_ the situation that prevents that
| doesn 't happen.
|
| Perhaps they should require your consent to invest your money
| in illiquid assets. If they can't promise depositors liquidity
| they are cheating on their obligation in hopes seek a higher
| interest rate (profit).
| daveguy wrote:
| It's not the bank that guarantees it. It's the US Government
| through FDIC insurance. And that is working perfectly. There
| is no guarantee implied or explicit over 250k / entity /
| bank. There are distribution facilities that allow higher
| amounts to be guaranteed and that is working too.
| gruez wrote:
| > Maybe the standard banking model is broken. Banks offer a
| theoretical guarantee of the ability withdraw your money at
| any time and then just hope the situation that prevents that
| doesn't happen.
|
| In this case it's not just a case of the depositor's money
| being tied up in illiquid assets, it's that the asset's
| market value dropped so that they're worth less than the
| deposits. This is slightly different than just the assets
| being "illiquid", because if were only illiquid, you can
| presumably pay off your depositors once a sale can be
| arranged. In this case even if they were able to sell the
| bonds, there won't be enough money to pay back the
| depositors.
|
| >Perhaps they should require your consent to invest your
| money in illiquid assets. If they can't promise depositors
| liquidity they are cheating on their obligation in hopes seek
| a higher interest rate (profit).
|
| That's... basically how banks implicitly work and one of
| their core functions (maturity transformation).
| fspeech wrote:
| You could go stronger with your assertion, that the MBS are
| actually fairly liquid (defintion: a quick sale will not
| cause a large drop in their value) but have large losses in
| market value compared to when they were bought. SVB should
| not have been allowed to use HTM accounting on such a large
| portfolio of their assets generated from hot money inflows.
| mankutimma wrote:
| Liquidity vs Solvency
| AnimalMuppet wrote:
| If by "cause" you mean "say lots of scary-sounding stuff in
| public", then no, there probably isn't. If by "cause" you mean
| "take your money out", then yes, there _is_ a cost. It takes
| time and effort to do. It especially costs if you 're playing
| dodgeball, trying to get out of every institution that everyone
| says might possibly be in danger of failing.
| JumpCrisscross wrote:
| > _VC guys who are disingenuously claiming that every bank in
| America is now at risk because of SVB_
|
| They're deflecting blame. A bailout is unrealistic given the
| House. And there is no contagion to the systemically-important
| banks. VCs should have advised their founders to adopt
| reasonable treasury procedures. Instead, they funnelled them
| into an easy solution.
| andrewstuart wrote:
| You're speaking with confident 20/20 hindsight.
|
| Who, realistically until now has had "bank goes bust" on
| their risk list?
|
| "Crypto exchange goes bust", almost a certainty, but "major
| bank goes bust", I don't think it's reasonable to criticize
| for not having five distributed bank accounts.
| hn_throwaway_99 wrote:
| This line of thinking _infuriates_ me. As an individual,
| _I_ risk manage my deposits by making sure I remain under
| federal insurance limits by spreading my investments among
| multiple institutions (the FDIC limit isn 't that relevant
| to me but the $500k SIPC limit is). Yet somehow
| "sophisticated" VCs aren't able to tell their partner
| companies how to manage the millions they hand them? There
| are straightforward, simple ways to increase insurance
| limits (primarily by services that automatically distribute
| deposits among multiple banks, like MaxSafe and IntraFi).
| The was just fundamentally poor asset management by VCs who
| got on the "well, everyone else uses SVB you should too"
| bandwagon.
| tsycho wrote:
| As an individual, you have much lesser money to spread
| around than a company. If a company with 25+ million in
| cash has to manage more than 100 accounts, they are more
| likely to make some other banking mistake and lose some
| of that money through some administrative mistake.
|
| That said, I sympathize with your broader point. With
| hindsight, it would make more sense for a company to have
| a brokerage account, and do something like invest their
| cash 1/3 each in 1-month/2-month/3-months Treasuries,
| rolling over every month.[1]
|
| But most tech CEOs/founders of tiny startups probably
| don't know much about finance, and I can't really blame
| them for just putting their cash in a large bank.
|
| [1] There's a startup opportunity to build this product
| right now, a pure custodian-style cash-management "bank"
| for small companies.
| hn_throwaway_99 wrote:
| > If a company with 25+ million in cash has to manage
| more than 100 accounts
|
| These products already exist. That is why I mentioned
| IntraFi (https://www.intrafinetworkdeposits.com/) and
| MaxSafe (https://www.wintrust.com/maxsafe.html). There
| are standard cash management accounts,
| https://www.moneycrashers.com/cash-management-account/.
|
| > But most tech CEOs/founders of tiny startups probably
| don't know much about finance, and I can't really blame
| them for just putting their cash in a large bank.
|
| Completely agree. But this is _exactly_ the type of area
| VCs should be there to assist with, even if just purely
| for self interest.
|
| > There's a startup opportunity to build this product
| right now, a pure custodian-style cash-management "bank"
| for small companies.
|
| Again, these already exist, and are literally called
| "cash management accounts".
|
| Also, though, it wasn't just SMBs. Roku had nearly $500
| million, a quarter of their cash, in a plain old SVB bank
| account!! Why they wouldn't put more of their money in 3
| month TBills earning nearly 5% is beyond me.
| MomoXenosaga wrote:
| "well, everyone else uses SVB you should too"
|
| Which is not even true because it is a tiny no name bank.
| Prior to this debacle if you asked an American to name a
| bank nobody would have said SVB.
| benglish11 wrote:
| Most Americans not being able to name it is not a good
| standard for bank size. Banks like SVB exclusively have
| businesses as customers and most Americans do not run
| businesses. It's not a tiny no name bank by any
| reasonable measure.
| gnicholas wrote:
| It was apparently the 16th-largest bank in the US. I live
| in SV but wouldn't have guessed it was that big. I'm sure
| it's much, much smaller than the #1 bank, but it's by no
| means a "tiny" bank in objective terms. It may not be
| well known in most of America, but it was a very large
| bank.
| hn_throwaway_99 wrote:
| You've misunderstood. When I said a VC says "everyone
| else uses SVB you should too", by the "everyone else" I
| was referring to other VC-funded startups, not the
| American populace at large.
| berberous wrote:
| I, and others, would never keep more than $250k in a bank
| account even before this SVB debacle. There are products
| made to manage this risk. For example, Mercury gives you up
| to $1M of insurance by sweeping to four different banks on
| the back end without you having to lift a finger. You can
| also sweep excess into money market funds.
|
| I do have sympathy for 20-something founders who were too
| young and unaware of these risks, and focused on other
| aspects of their business, but this is not a "hindsight
| only" kind of thing.
| JumpCrisscross wrote:
| > _Who, realistically until now has had "bank goes bust" on
| their risk list?_
|
| Every corporate treasurer. This is a core function of a
| CFO. I didn't realise the degree to which this was missing
| in Silicon Valley so soon after a global financial crisis.
| nthngtshr wrote:
| Startups don't hire CFOs until the revenue is in 10s of
| millions of ARR. And most companies don't ever get there.
| r_hoods_ghost wrote:
| Really?!! There's a reason the government insures deposits,
| but up only to a certain amount. Because banks go bust
| pretty frequently. Of course this is the sort of think that
| should be on your risk register, whether you're an
| individual or a company.
| justin66 wrote:
| > VCs should have advised their founders to adopt reasonable
| treasury procedures. Instead, they funnelled them into an
| easy solution.
|
| I am in awe of how aggressively stupid VCs are being about
| this:
|
| https://twitter.com/htaneja/status/1634620603469647873?cxt=H.
| ..
|
| _Silicon Valley Bank has been a trusted and long-time
| partner to the venture capital industry and our founders. For
| forty years, it has been an important platform that played a
| pivotal role in serving the startup community and supporting
| the innovation economy in the US._
|
| _The events that unfolded over the past 48 hours have been
| deeply disappointing and concerning. In the event that SVB
| were to be purchased and appropriately capitalized, we would
| be strongly supportive and encourage our portfolio companies
| to resume their banking relationship with them._
|
| In other words, they're going to keep doing the same stupid
| thing, more vigorously.
| howmayiannoyyou wrote:
| From @commbankerguy | https://twitter.com/commbankerguy | on
| Twitter on evaluating your bank, where more than one factor
| should be in play to probably be of concern:
|
| https://twitter.com/commbankerguy/status/1634637082659364866
|
| 1. Red flag if cash as % of assets or deposits is below 3%.
| Meaning can they handle a withdrawal of up to 3% or is cash tied
| up in bonds.
|
| 2. Red flag if tangible capital is under 4% after looking at bond
| portfolio as % of tangible capital (this one wasn't totally
| clear, but I think get the idea).
|
| 3. Red flag if over 20% of liabilities are brokered deposits
| and/or funds borrowed from FHLB. If the bank is not well
| capitalized those funds become restricted/unavailable.
|
| Also:
|
| High concentration of consumer deposits is less likely to face
| destabilizing run.
|
| For example @commbankerguy says:
|
| "If 50% in brokered/FHLB and capital level of 5%, I would
| recommend you move your money if over $250k."
| https://twitter.com/commbankerguy/status/1634764850126520320...
|
| @Citrini7 shorted $SIVB in late 2022 after marking their holding
| to market and finding their book value was negative.
| https://twitter.com/Citrini7/status/1583593158738612226?s=20
|
| Then this dude created an SVB recovery analysis that is legend:
|
| https://docs.google.com/spreadsheets/d/13OyOLDePh85Wna5xcyTi...
| [deleted]
| dzink wrote:
| Panic is contagious. The real risk to any bank these days seems
| to be a Crypto affiliation. Fatal Bank runs happen if you have a
| group of people who talk to each other and have a large % of
| holdings in the bank (so sudden pull of those holdings ends up
| putting the bank under liquidity thresholds). Circle has the
| biggest or one of the biggest accounts in SVB and the stable-coin
| run or another factor made them rebalance. VCs, another large
| connected cluster at SVB got wind of it, and drained the rest.
| First Republic has VC exposure but not to Circle. There are 5
| other banks that are affiliated with Circle and if any of them
| are struggling with underwater bonds, that would be a big
| problem.
|
| There are a lot of interest-rates-weakened non-crypto affiliated
| banks in the US, but their deposits are mostly under the FDIC
| threshold. SVB had the worst vin diagram of all: Crypto, large
| average deposits, and very inter-connected client base.
| lordfrito wrote:
| Bitcoin solves this.
|
| Few understand.
|
| /s
| dehrmann wrote:
| The SVB run was unrelated to crypto, other than that VCs also
| invest in crypto startups. We're also past the point of a group
| of people talking to each other about bank risk; now everyone's
| looking at it.
| TacticalCoder wrote:
| > The real risk to any bank these days seems to be a Crypto
| affiliation.
|
| Maybe. Meanwhile the second biggest bank failure in the history
| in the US is undergoing and it has _nothing_ to do with crypto.
|
| > Circle has the biggest or one of the biggest accounts in SVB
| and the stable-coin run or another factor made them rebalance.
|
| It's Circle's fault now?
|
| > There are 5 other banks that are affiliated with Circle and
| if any of them are struggling with underwater bonds, that would
| be a big problem.
|
| Circle, unless they're lying, said they have $5.4 bn at BNY.
| $3.3 at SIVB and the rest over the 5 other banks. So out of
| $9.8 bn in USD cash reserves, there is at most $1.1 bn left,
| spread over 5 banks.
|
| I don't think it's a problem as big as you pretend it is.
|
| I also think it's an argument made in very bad faith that
| Circle is responsible for this. SIVB had, at one point, $200 bn
| AuM. $3.3 bn is not nothing but it's not much compared to $200
| bn.
| dzink wrote:
| In the Circle press announcement they shared that last week,
| prior to the collapse, they moved several billion into BNY
| Mellon, and 3.3 remained at SVB. They didn't say if they
| removed them FROM SVB to put them into BNY but they didn't
| say they didn't either and the "remained" leads to that
| assumption. They had pulled assets from Silvergate as well
| and then Silvergate collapsed, but they have no exposure to
| it. That tells you that Circle with its gigantic accounts may
| have realized the banks are vulnerable, pulled its money out
| (or been forced to by crypto investors cashing in their
| USDC), and that money is a disproportionately large share of
| the liquidity those banks were holding. When SVB was
| shuttered it was underwater by slightly less than a billion.
| Circle is not to blame, as they did what they probably had to
| do, but the size of Circle's accounts would probably bring
| down most banks in these conditions.
|
| The banks partnering with large crypto whales in a high
| interest rate environment are likely in deep trouble. SVB was
| the perfect bank for startups, but its appetite for crypto
| and poor risk management likely caused the collapse.
|
| https://www.circle.com/blog/an-update-on-usdc-and-silicon-
| va...
| dzink wrote:
| The full list of banks that held cash for Circle's USDC are
| Bank of New York Mellon, Citizens Trust Bank, Customers
| Bank, New York Community Bank (a division of Flagstar Bank,
| N.A.), Signature Bank, Silicon Valley Bank and Silvergate
| Bank. Circle also keeps some part of USDC reserves in a
| dedicated BlackRock fund. Circle said last week it had cut
| ties with Silvergate Bank, the crypto-friendly bank that
| halted operations and said it would "voluntarily liquidate"
| its assets earlier this week.
| https://www.coindesk.com/markets/2023/03/10/scrutiny-
| falls-o...
| fairity wrote:
| As a public service, I would recommend you down vote into
| oblivion any comment/article spreading FUD like this one.
| Although the fears are valid, talking about it and spreading it
| is exactly what causes the vicious cycle that will lead to
| another unnecessary bank run. If you want to pull your money, do
| so silently. Stop telling other people about it.
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