> The investment portfolio is less than 15% of total bank assets. Of this, less than 2% of total bank assets is categorized as available for sale.
Is 2% good or bad?
First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
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Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#22I'm sorry buddy, but this is no longer about tech or bonds. This is more about whether you can survive a withdrawal storm. This is more about whether someone will back you up with credibility.
Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#23I’m not super well informed about this space, but my understanding was that SVB’s issue wasn’t that its depositors were from the tech sector, but rather that it had put a ton of capital into investments that are significantly less valuable (on the open market today) now than they were a year ago due to increasing interest rates. I’m curious how the tech sector matters here specifically?
The big concern is the contagion spreading. All banks are vulnerable to failure if deposits are taken out quickly, especially in this market where assets have taken a huge hit over the last 12 months.
FRB wants people to believe the contagion is limited to tech and that they have limited exposure to it, so that folks don’t take deposits out en masse. If people start to think that it’s unstable, then they’ll take money out and it’ll be a death spiral like SVB.
Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#24I’m not super well informed about this space, but my understanding was that SVB’s issue wasn’t that its depositors were from the tech sector, but rather that it had put a ton of capital into investments that are significantly less valuable (on the open market today) now than they were a year ago due to increasing interest rates. I’m curious how the tech sector matters here specifically?
Matt Levine reports that the reason they had to buy those low-yield investments that plummeted is because it’s tech-sector customers had too much money in the boom times. Too much deposits means they need to buy a lot of something , and in the boom times that was low-yield stuff.
Sort of the other way to handle it would be to say “we can’t find risk-free yield for the volume of cash we just had deposited, so deposits now get 0.8% instead of 1.0%”
Which is kinda fine? Means you might lose some business as others chase yield. But I feel like most startups don’t actually have that much cash in the bank so they shouldn’t really be chasing yield anyway.
It didn’t take a genius to predict interest rates were going to rise. Locking cash away for 10yrs in very low % return vehicles seems stupid?
Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#25I’m not super well informed about this space, but my understanding was that SVB’s issue wasn’t that its depositors were from the tech sector, but rather that it had put a ton of capital into investments that are significantly less valuable (on the open market today) now than they were a year ago due to increasing interest rates. I’m curious how the tech sector matters here specifically?
The tech sector has been withdrawing money in aggregate (because they continue paying payroll and rent but haven't been raising as much money recently) which increases liquidity pressure, and furthermore tech depositors are more skittish due to experience with FTX and thus prone to panic bank runs. They also have larger average account sizes, way beyond FDIC limits, which makes them more likely to need to withdraw mo…
Huh, so at least one quarter of depositors will get 100% on the dollar.
Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#26Hopefully the panic will not spread. Multiple people were calling me to ask whether they should get their money out of their bank. But keep in mind that people also went through a pandemic, where panic was the go-to option.
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Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#27In general, if anyone wants to go through all the recent 8-K filings, this is what SEC EDGAR is for. Here's a link that'll bring up all recent 8-K filings by date and time, descending: https://www.sec.gov/cgi-bin/browse-edgar?action=getcurrent&d... In general, I would expect a ton of 8-Ks on Monday the 13th for companies to release information on their exposure to SIVB, particularly if their exposure is minor or non-…
Thanks for that, was browsing around to figure out how to sort by date.
Probably a lot filed today/monday that look like this:
Kintara Therapeutics, Inc. confirms that it does not hold any deposits or securities or maintain any accounts at Silicon Valley Bank.
Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#28The fact that they filed a last minute report on a Friday night speaks volumes about the amount of withdrawals they must be experiencing. This is about as strong as a signal they could put out to stop a possible run.
Fwiw this came out around 9:30am PT (~9 hours ago from this comment), was only just posted to HN this evening.
Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#29I’m not super well informed about this space, but my understanding was that SVB’s issue wasn’t that its depositors were from the tech sector, but rather that it had put a ton of capital into investments that are significantly less valuable (on the open market today) now than they were a year ago due to increasing interest rates. I’m curious how the tech sector matters here specifically?
Why are banks even allowed to buy assets? Every asset is a risk. Banks should have right to do exactly two things. Keep their customers saving and issue loans. There's plenty of risks even in that activity. Every other thing bank does is just piling up risk to unreasonable levels.
I think this was a weird thing where deposit demand was so much greater than loan demand. They had too much money and thought they were doing a safe thing. But failed to consider the time aspect and how rapid interest rate increases nuke them.
Banks do provide a valuable service and having them reject deposits isn’t a solution.
Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%
#30[deleted]