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HSBC to Buy UK Arm of Silicon Valley Bank

bbc.co.uk

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Re: HSBC to Buy UK Arm of Silicon Valley Bank

#121

Post by shapefrog »

dan-robertson wrote: post #108
bognition wrote: post #59

Earlier quoted context omitted.

What is “free money” and how does a big bank print money?

One point is that hsbc might not be acquiring all of the liabilities – they might mostly get customer deposits but not eg some unsecured loan or bond issue. Regulators could be ok with such an outcome because a bunch of businesses losing bank deposits may be seen as worse than a single company defaulting on its debt. Another is that SVB UK could be solvent so long as they don’t have to sell assets at a loss. Being pa…

> Being part of hsbc stops the assets needing to be sold at a loss

Borrowing in the maket at 5% so you can keep the bonds paying 1% for the next 10 years might not seem like a "loss" but it is a loss.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#123

Post by alasdair_ »

collectedparts wrote: post #28
cjrp wrote: post #16

Seems like a great deal for HSBC? Presumably the competition regulator gives deals like this a free pass. > As at 10 March 2023, SVB UK had loans of around £5.5bn and deposits of around £6.7bn. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88m.

It's said that no bank (even the best-managed) can withstand a fullscale bank run. So to the extent that the US side of things created a crisis of confidence, that might have been enough to topple SVB UK, even if all of its fundamentals were OK.

A Narrow Bank can survive a full bank run.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#126

Post by dragonwriter »

shawabawa3 wrote: post #33
collectedparts wrote: post #28

Earlier quoted context omitted.

It's said that no bank (even the best-managed) can withstand a fullscale bank run. So to the extent that the US side of things created a crisis of confidence, that might have been enough to topple SVB UK, even if all of its fundamentals were OK.

> It's said that no bank (even the best-managed) can withstand a fullscale bank run I keep reading this but this should not be true Any bank will hit liquidity issues on a full-on bank run, as not 100% of a banks assets will be marketable, but central banks will provide emergency liquidity in these situations But banks should not hit insolvency issues like SVB did

> Any bank will hit liquidity issues on a full-on bank run, as not 100% of a banks assets will be marketable, but central banks will provide emergency liquidity in these situations

That was not the case in the US for banks with HTM assets until the backstop program announced by the Fed in the wake of the SVB collapse.

> But banks should not hit insolvency issues like SVB did

SVB’s liquidity issues turned into solvency issues because of the absence of a liquidity backstop.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#127

Post by evancox100 »

dragonwriter wrote: post #126
shawabawa3 wrote: post #33

Earlier quoted context omitted.

> It's said that no bank (even the best-managed) can withstand a fullscale bank run I keep reading this but this should not be true Any bank will hit liquidity issues on a full-on bank run, as not 100% of a banks assets will be marketable, but central banks will provide emergency liquidity in these situations But banks should not hit insolvency issues like SVB did

> Any bank will hit liquidity issues on a full-on bank run, as not 100% of a banks assets will be marketable, but central banks will provide emergency liquidity in these situations That was not the case in the US for banks with HTM assets until the backstop program announced by the Fed in the wake of the SVB collapse. > But banks should not hit insolvency issues like SVB did SVB’s liquidity issues turned into solvenc…

Treasuries are some of the most liquid instruments available, it is not a “liquidity” issue like “How do I line up buyers for all these weird, hard-to-price assets”.

And the measure put in place by the Fed is not a liquidity back stop, it is a value/solvency bailout, or kind of capital infusion. This is what SVB was trying to do on Wednesday, raise capital. That should tell you it is not a liquidity problem.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#128

Post by shapefrog »

mdasen wrote: post #29
dmix wrote: post #8

Earlier quoted context omitted.

We don't know who bought SVB yet it will likely be announced tomorrow (EST/PST timezone) probably. The US gov announcing the full confidence of deposits wasn't merely an altruistic move, they likely had a buyer at the time of announcement and maybe a secondary commitment to support the mortgage debt which caused the whole thing.

The announcement from Treasury, the Fed, and the FDIC was that depositors would be made whole and that there would be an assessment on banks to cover it. As such, I'd assume that there was no buyer. https://home.treasury.gov/news/press-releases/jy1337 > No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer... Any losses to the Deposit Insurance Fund to support uninsured deposit…

> will then pass along those costs to their customers seems like a roundabout way of taxpayers paying

By that logic the cup of coffee I bought earlier was paid for by the taxpayer because I a taxpayer paid for it.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#129

Post by jalapenos »

collectedparts wrote: post #28
cjrp wrote: post #16

Seems like a great deal for HSBC? Presumably the competition regulator gives deals like this a free pass. > As at 10 March 2023, SVB UK had loans of around £5.5bn and deposits of around £6.7bn. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88m.

It's said that no bank (even the best-managed) can withstand a fullscale bank run. So to the extent that the US side of things created a crisis of confidence, that might have been enough to topple SVB UK, even if all of its fundamentals were OK.

Small doors?

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#130

Post by mywittyname »

kyrra wrote: post #100
shawabawa3 wrote: post #33

Earlier quoted context omitted.

> It's said that no bank (even the best-managed) can withstand a fullscale bank run I keep reading this but this should not be true Any bank will hit liquidity issues on a full-on bank run, as not 100% of a banks assets will be marketable, but central banks will provide emergency liquidity in these situations But banks should not hit insolvency issues like SVB did

There's a certain amount of risk with all lending and investment that banks do with deposit funds. This can be home loans, government bonds, and other relatively safe products. I don't think it should be up to the government to back these risks, because if banks think the government will always rescue them, they don't need to care as much about risky investments. You could argue that it is depositor money, so they're…

This isn't really feasible. Bank executives will fill fight the regulations that stabilize their bank against market swings, and citizens will demand that the government do something when irresponsible bank executives lose their life savings. Banking regulations, like most regulations, are written in blood, but for some reason, the banking sector is the most adept at getting regulations overturned.

So the resulting system is a patchwork of solutions that force the government into the role of rescuer. It's just too difficult to get most regulations to stick long enough to prevent another banking crisis. Barring a Constitutional amendment to create a banking "tsar" with broad authority and who reports to no-one (i.e., non-political), the best solution we have is to have the government step in when banks inevitably fail.

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