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Silicon Valley Bank Failure [pdf]

am.jpmorgan.com

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Re: Silicon Valley Bank Failure [pdf]

#101

Post by tempsy »

metalspot wrote: post #80
mrkurt wrote: post #60

Earlier quoted context omitted.

We use Mercury, they're a frontend though. They're not a bank. Our checking/savings are with Choice Financial, and swept into at least four of these banks: https://co-mercury-prod.s3.amazonaws.com/legal/Choice+-+Depo... We use their Treasury account type for most of our cash. It's split between Morgan Stanley and Vanguard funds. Now, if Mercury fails it's going to be a pain in the ass to get at the money in these bac…

also use mercury for the same reason. they are a tech company that provides a good interface to baking services at a wholesale price, which is very different than trying to be a bank. for actual banking i see know reason to use anyone other than jpm chase.

they work with tiny regional banks that act as a white label service

if one or more of those tiny regional banks fail in the same way SVB did I don’t see why there wouldn’t be an issue as a customer of Mercury

it’s also unknown what percentage of these banks’ total deposits are Mercury deposits now. if it’s a lot then you have the same risk of a bank run on the Mercury side disproportionately impacting the solvency of the underlying bank

Re: Silicon Valley Bank Failure [pdf]

#102

Post by JumpCrisscross »

runeks wrote: post #95
nonethewiser wrote: post #5

I think we’re too accustomed to startups here to recognize that SVB was actually assuming quite a bit of risk. We acknowledge most banks don’t want to touch startups and that startups will have a harder time banking in the future. Yet I don’t see much consideration for the fact that there is a good reason most banks see startups as risky. It’s just explained away as “they don’t understand .” Also consider the past 10…

> [...] SVB was actually assuming quite a bit of risk. Honest question: compared to what? Did long duration assets (like bonds) comprise a greater proportion of SVB's assets compared to, say, JP Morgan? Or is the case that JP Morgan is as insolvent as SVB, but JPM's depositors are less likely to withdraw their funds (because it's a big bank and it has primarily retail customers)? These are honest questions; I'm not s…

> Did long duration assets (like bonds) comprise a greater proportion of SVB's assets compared to, say, JP Morgan?

Yes. JPMorgan is subject to the Fed’s stress tests and Basel III, both of which test duration. (SVB successfully lobbied to be exempt from both.)

Re: Silicon Valley Bank Failure [pdf]

#103

Post by fach »

A child-like regulatory question: Why aren’t HTM portfolios for retail banks frequently marked to market? Wouldn’t this force more accurate accounting in the event a bank needed to sell bonds in a capital crunch?

Re: Silicon Valley Bank Failure [pdf]

#104

Post by belter »

runeks wrote: post #85
belter wrote: post #2

"The liabiity issue: extreme reliance on institutional/VC funding rather than traditional retail deposits While capital, wholesale funding and loan to deposit ratios improved for many US banks since 2008, there are exceptions. As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of…

That's actually quite concerning, if you read between the lines. What they're saying is: "JPM is just as insolvent as SIVB. The only difference is that JPM's customers are less likely to withdraw their funds."

You got it :-)

Re: Silicon Valley Bank Failure [pdf]

#105

Post by notmindthegap »

fach wrote: post #103

A child-like regulatory question: Why aren’t HTM portfolios for retail banks frequently marked to market? Wouldn’t this force more accurate accounting in the event a bank needed to sell bonds in a capital crunch?

Why aren’t most assets marked-to-market, at least in some regular fashion?

Re: Silicon Valley Bank Failure [pdf]

#106

Post by hirako2000 »

ChrisMarshallNY wrote: post #53
nonethewiser wrote: post #5

I think we’re too accustomed to startups here to recognize that SVB was actually assuming quite a bit of risk. We acknowledge most banks don’t want to touch startups and that startups will have a harder time banking in the future. Yet I don’t see much consideration for the fact that there is a good reason most banks see startups as risky. It’s just explained away as “they don’t understand .” Also consider the past 10…

The last ten years have been a wild, Bacchanalian orgy of loose money. It is now time for Bilious[0] to appear. [0] https://discworld.fandom.com/wiki/Bilious

Good ref, I had no clue of bilious existence.

Yes, reality eventually back fires. It's not like the fed figured they should turn around because "inflation". It may simply be that they can't keep printing since it has become much harder to dump it anymore on (global) producers. See the geopolitics, Finance101 isn't enough to grasp the magnitude and seriousness of what's been going on lately.

Re: Silicon Valley Bank Failure [pdf]

#107

Post by deet »

chewz wrote: post #46

This is rather silly explanation of what happend, especially from JP Morgan... Everyone who have ever managed bond portfolio knows that he must hedge interest rate risk. And every bank is doing that. SVB didn't. Since April 2022 till January 2023 SVB had vacant position of Credit Risk Officer.. And the explanation is simple - SVB's former head of risk, Laura Izurieta had left after 1Q2022 when looses from bond portfo…

Which part is silly though? The JPM report is indeed essentially saying that they didn't properly hedge interest rate risk.

It just adds that SVB's situation was exacerbated by the fact that the health and size of the deposit base they had cultivated was also inversely correlated with interest rates (ie VC and startup activity declines with rising rates), which made their situation even more precarious than at other banks.

Re: Silicon Valley Bank Failure [pdf]

#108

Post by onlyrealcuzzo »

notmindthegap wrote: post #105
fach wrote: post #103

A child-like regulatory question: Why aren’t HTM portfolios for retail banks frequently marked to market? Wouldn’t this force more accurate accounting in the event a bank needed to sell bonds in a capital crunch?

Why aren’t most assets marked-to-market, at least in some regular fashion?

So you can cheat taxes & take on excess debt?

Re: Silicon Valley Bank Failure [pdf]

#109

Post by metalspot »

tempsy wrote: post #101
metalspot wrote: post #80

Earlier quoted context omitted.

also use mercury for the same reason. they are a tech company that provides a good interface to baking services at a wholesale price, which is very different than trying to be a bank. for actual banking i see know reason to use anyone other than jpm chase.

they work with tiny regional banks that act as a white label service if one or more of those tiny regional banks fail in the same way SVB did I don’t see why there wouldn’t be an issue as a customer of Mercury it’s also unknown what percentage of these banks’ total deposits are Mercury deposits now. if it’s a lot then you have the same risk of a bank run on the Mercury side disproportionately impacting the solvency o…

they can fail all they want as long as you have less than 250K deposited. if you are using mercury as a transaction agent then you have no risk. you keep your deposits at a tbtf bank, then automate your transactions to run through mercury, so you pay lower transaction fees.

Re: Silicon Valley Bank Failure [pdf]

#110

Post by tempsy »

metalspot wrote: post #109
tempsy wrote: post #101

Earlier quoted context omitted.

they work with tiny regional banks that act as a white label service if one or more of those tiny regional banks fail in the same way SVB did I don’t see why there wouldn’t be an issue as a customer of Mercury it’s also unknown what percentage of these banks’ total deposits are Mercury deposits now. if it’s a lot then you have the same risk of a bank run on the Mercury side disproportionately impacting the solvency o…

they can fail all they want as long as you have less than 250K deposited. if you are using mercury as a transaction agent then you have no risk. you keep your deposits at a tbtf bank, then automate your transactions to run through mercury, so you pay lower transaction fees.

that was also true of SVB
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