Silicon Valley Bank - Bank Run

We cannot tell at the moment. Ask again in a month.

I think we all know that there are worries to value of bank held bond portfolios because interest rates rising makes those bonds less valuable.

Interest rates increased to curb inflation.

Unrealised losses SVB is forced to take - timing is everything. SVB seem to be on the losing side of interest bets, for now.

You will have seen that the particular circumstances which caused the downfall of SVB were ‘company specific’, fancythat. However it remains to be seen whether any other banks find themselves in that particular set of circumstances. The US Regulator has taken an early grip. It’s not a domino situation.

Germanshepherdsmum The US Regulator has taken an early grip. It’s not a domino situation.

Indeed, that's the most important bit.

www.dailymail.co.uk/news/article-11849995/Fears-existential-threat-British-tech-firms-collapse-Silicon-Valley-Bank.html

Read about it elsewhere if you want to. If you dont like a DM link.

That is about the effect on tech firms, not bringing down other banks as you suggested.

Son and SIL both work for Silicone Valley companies.
They are both concerned.

Germanshepherdsmum

That is about the effect on tech firms, not bringing down other banks as you suggested.

I mentioned businesses as you can see.

Banks - we will find out more tomorrow I would think.
Things unravel very quickly if they do unravel.

Sorry to hear that Sago. The effects will be felt by employees of tech companies here and in the US I fear, maybe further afield.

Sago

Son and SIL both work for Silicone Valley companies.
They are both concerned.

It is a worrying time for some.
Hope they will be ok Sago.

Posted too soon. I hope your son and sil will be ok Sago.

Contagion will follow, shareholders now have the heebie jeebies and I can see shades of 2008, also house price falls as the housing market has not had the necessary small corrections for many years. Best position to be right now is debt-free with some savings as a cushion

Other banks will not collapse but companies might. I used to share-trade and could always see how the american market affects world markets, in an instant. Tech companes are vulnerable and can move share price very quickly. The old adage when trading is to sell high and buy low and many will be doing that now, to wrap up profits

From todays DT

Depositors can’t get their money out. Payrolls might not be met next weekend. And small companies, especially in the fast growing technology industries, might soon face closure as their assets are frozen. There will be a lot of nervousness when the financial markets open tomorrow morning following the collapse of the Silicon Valley Bank in the United States and the decision by the Bank of England to take control of its London arm
In reality, that is more than justified. There is a real risk of a full-blown bank run. Central banks will have to move quickly and decisively to stop the situation spiralling out of control. And yet they also need to learn the lessons of 2008 and 2009, the last time the financial system was in this much trouble.
Depositors should be protected. But bondholders and shareholders should be left to look after themselves. And, just as importantly, there should be no return to the easy money of the last decade. Otherwise we will have learned nothing from the crash of 2008 and 2009 – and risk repeating all the mistakes
🤔🤔🤔 Not looking good..

Brother works in NY, we talked about SVB. In America the FDIC (basically insurance) backs banks. FDIC is in charge as noted below:

WASHINGTON – Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.

All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.

Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds.

As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.

Thanks Norah. Very useful post.

www.fitchratings.com/research/us-public-finance/fitch-affirms-silicon-valley-power-ca-at-aa-outlook-stable-13-01-2022

Outlook Stable.
They got it wrong.

This link is more up to date

www.thestreet.com/technology/moodys-failed-to-warn-about-silicon-valley-banks-problems

fancythat. Thank you for the link, makes interesting reading. Yet another example of an organisation not doing the "safeguarding" it is meant to do.

HSBC has bought the British arm to save the British customers. They can continue banking as normal. Hurrah.

toscalily

*fancythat*. Thank you for the link, makes interesting reading. Yet another example of an organisation not doing the "safeguarding" it is meant to do.

hence the contagion, curbs to selling stocks will now be in place. Stocks will be difficult to sell and the markets will go down slower rather than rapid diving as in panic selling

toscalily quite.
There was a financial film we watched, cant remember what it was called. I think it was about the collapse of Lehman Brothers? As far as I can remember, same thing happened. The agencies did not act well.

karmalady Thank you for your measured and informative replies.

J52 Hurrah.
Personally for me, this has all acted as a Canary in a coal mine situation.

The cause of Lehman Bros’s collapse was caused by the sub-prime mortgage scandal, which affected other financial institutions as well. Regulations have changed massively since then.

But looks like possible duff ratings have not. Just like in that case. As long ago as 2008.
The Moodys rating was only January this year.

It gave it an A rating up to the day before it's collapse!