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First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

ir.firstrepublic.com

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Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#161

Post by salawat »

eastbound wrote: post #159
prottog wrote: post #84

Earlier quoted context omitted.

> Why not just hold them > If there is a run If there is a run, they become forced sellers, because they don't have enough cash on hand to meet withdrawals. That's the whole story. They must prevent a bank run.

Can’t they just not honor the run, so that they can honor it in the long term, rather than selling at a loss and not being able to honor 20% of them?

No. That's theft. That's not how deposits work.

You lend out on shorter terms than you figure your depositor will need and pray they don't need it back. If they all do though, you're screwed.

It's statistical multiplexing as applied to piles of other people's money.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#162

Post by dmoy »

fanzhang wrote: post #58
mdorazio wrote: post #48

I'd really like to know where people are withdrawing their money from these banks to . They're not taking suitcases of cash, so it must be flowing to some other financial institutions. Is it going to traditional big banks (BofA, Wells, Chase, etc.)?

Yes -- all the people I know withdrawing from small banks are going to Chase or Morgan Stanley. These largest banks have to mark-to-market their losses and have a lot of cash (short duration) assets, and are literally too big to fail.

And, more importantly, are national banks regulated by the occ so they can't do the same kinds of risky things that svb & co can do. (They can do other risky things that they come up with historically, especially pre dodd-frank, but not this)

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#163

Post by twblalock »

vineyardmike wrote: post #113
ptero wrote: post #67

Earlier quoted context omitted.

FDIC insures $250k per account, so most retail clients have no reason to bolt, which provides a lot of stability for traditional banks.

True, but can you imagine having rent money in your account when the bank collapses... edit: apparently getting your money is fast and easy

I know people who had their checking and savings at Washington Mutual when it failed in 2008.

The FDIC arranged for Chase to take it over. Nobody lost any money, and nobody I know had any problems with checks clearing or withdrawing cash at ATMs or paying their rent or mortgages.

I think the demise of Washington Mutual is still considered the biggest bank failure in US history, it happened while quite a lot of other bad things were happening, yet depositors ended up being totally fine. The systems in place for this are actually really good, and the FDIC is fast and competent.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#164

Post by welder »

ahzhou wrote: post #62

> Consumer deposits have an average account size of less than $200,000 Whoa! FRB has wealthy customers. US average cash in savings accounts is $41,600. And this is pure cash too - not total net worth.

They're HQ is San Francisco, the number 3 city with the most millionaires per capita in the world [0].

https://www.visualcapitalist.com/top-20-cities-ultra-wealthy...

I loved how they always had fresh cookies available for clients when you went in-person.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#165

Post by beefield »

resource0x wrote: post #71
metacritic12 wrote: post #53

Counterpoint: This WSJ Article [1] and their latest 10Ks confirm that: - Their actual assets market-to-market (sold on the fair market) is about $26 bln less than the amount they're carried at on their books. This is as of year end 2022, probably more today. - This would wipe out all their equity, loans, and start hitting depositors. - If there was a bank run, First Republic probably would not be able to meet all dep…

> If there was a bank run, First Republic probably would not be able to meet all depositors. If everyone knows this, why keep your money there? Tech exposure has nothing to do with it. "In a bank run, he who runs first, runs best".

>If everyone knows this, why keep your money there?

Because that applies to literally every single operative bank, and given FDIC insurance and other refulation, the risk of deposit losses for average joe is so small that they do not need to care.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#166

Post by TechBro8615 »

dannyw wrote: post #79
resource0x wrote: post #71

Earlier quoted context omitted.

> If there was a bank run, First Republic probably would not be able to meet all depositors. If everyone knows this, why keep your money there? Tech exposure has nothing to do with it. "In a bank run, he who runs first, runs best".

Tech businesses tend to have more direct access to information (e.g. Twitter, emails), and listen to VCs and investors. Regular people and businesses don't hear about these things. Today, only 1 other person in my friend group of 6 heard about SVB.

It's currently the top article on CNN, Fox News, NYT, WSJ, and Twitter Trending. Your friends must live under a rock.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#167

Post by lordnacho »

colechristensen wrote: post #150
ramesh31 wrote: post #139

Earlier quoted context omitted.

>I feel like a very likely outcome on Monday is that the FDIC announces a buyer, SVB depositors realize they're going to be made whole, and all the panic subsides. Everyone saying "they will be made whole" is completely missing the fact that money has a time value. There's nothing "made whole" about getting access to your money weeks or months from now.

A likely outcome is everyone is going to be made whole on Monday. The feds will find a buyer to take on the deposit accounts and people are going to wake up consumers of Goldman or whomever instead of SVB. Look at history and for example what happened to WaMu. It was literally one day.

I agree this seems very likely. A bunch of people will be having interesting phone calls this weekend, but it's the weekend and it's pretty useful.

Then again last time I thought this I had a contact text me joking he was preparing to learn Korean because his bank was probably going to get bought by Koreans. Seemed like it was just a matter of time to wait until Monday to see what the higher ups had decided.

You can guess where this contact was working. Until that Monday.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#168

Post by asimpletune »

sroussey wrote: post #50
gonehome wrote: post #24

Earlier quoted context omitted.

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…

Yeah, I would not have done it. You always go short maturity at low rates. Unless you are borrowing, then the opposite. Depositors weren’t getting anything. I’m guessing SVB wanted yield for shareholders.

I think they were paying interest on accounts, and it was actually becoming substantial especially as deposits increased so much.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#169

Post by lordnacho »

dannyw wrote: post #98
twblalock wrote: post #93

Earlier quoted context omitted.

> - If there was a bank run, First Republic probably would not be able to meet all depositors. That's true for all banks, even JP Morgan Chase. Every single one of them has some withdrawal limit, past which they are screwed. And that limit is definitely lower than 100% of deposits.

Institutions deemed relatively safer (e.g. JPM Chase) are the banks that people withdraw to. Nobody is taking out $20M in cash, they're moving it to the "too big to fail" banks.

That got me wondering why anyone leaves amounts over 250k anywhere else.

If you have 5m are you going to open 20 bank accounts? If there's a wobble you'll need to dig out a lot of credentials to move your money, and you'd end up moving it to a TBTF anyway.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#170

Post by lordnacho »

WWLink wrote: post #142
bombcar wrote: post #110

Earlier quoted context omitted.

This is mainly but not limited to trying to prevent a bankrupt entity from “getting rid” of all its assets. I don’t know if it would apply to a bank wire transfer of “your own money” unless it was a literal fraud situation (pyramid scheme).

I can't imagine that going well. "No we're taking your $50k life savings back so we can give it all to a client that had $5mil and deserves your $50k life savings more than you do"

Not sure if this type of cynicism is more Reddit than HN, but somehow I suspect the rules are more likely to be written by the guy with the 5M deposits and his even richer friends.
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