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SVB Hall of Shame

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Re: SVB Hall of Shame

#301

Post by rswail »

kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

Aussie banks have both fixed and variable rate mortgages.

Most mortgages are either:

* Fixed: 1-5 year terms with exit fees if changed earlier

* Variable: 25 year terms, with variable rates, "offset accounts" (an associated account where you can deposit that offsets the outstanding principal of the mortgage), reduced or zero entry/exit fees, ability to "redraw" (effectively treating the mortgage as a line of credit) etc.

Re: SVB Hall of Shame

#302

Post by rswail »

NovaDudely wrote: post #170
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

I will preface this with - arm chair analysis. I don't know a huge amount about the banking system but I do have one point to make... It is hard to tell is the aussie banks are in any better position. The debt leverage ratio of the big four are incredibly difficult to track down. The last figures I saw are from about 2015 and even then banks like Commonwealth bank were leverage at something like 60:1 however looking…

Australia has the equivalent of FDIC insurance (called FCS) that covers up to AUD250K per account holder at all ADIs.

The 4 "major" banks in Australia (Commonwealth, Westpac, NAB, ANZ) all maintain ratios above the minimum requirements and above the international requirements for "unquestionably strong". They're also (implied) "too big to fail".

APRA (our banking regulator) publishes plenty of stats.

I found this presentation https://www.commbank.com.au/content/dam/commbank-assets/inve... for the Commonwealth for FY21, which shows that their loan book is funded 73% by deposits, and the remainder is 74% long term, with a 5 year average maturity and they have 13.1% of their capital retained.

So if they have they have 13% capital, as well as AUD175B in liquid assets, with $610B in deposits, then they'd start to be in real trouble if more than 25% of their account holders started pulling out cash.

Of that $610B, $310B is households, so the split between standard savings accounts and business/investment/term deposits etc is roughly 50/50.

Re: SVB Hall of Shame

#303

Post by rswail »

klabb3 wrote: post #203
kondro wrote: post #91

Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…

> If they want equity, they should sell long-term secured loans with LVRs under 100% or lock in my cash with term deposits or any number of other less liquid asset classes. Exactly. Banks get special sweet deal privileges for their “superior” ability to manage risk and they still haven’t come up with a way to protect against a few days of rumors? I don’t buy it. Either it’s extreme incompetence, world record complace…

Isn't a term deposit exactly what you are looking for? Lock in for 3/6/12 months or more and get a higher rate.

Aussie banks offer it.

Re: SVB Hall of Shame

#304

Post by rswail »

p1necone wrote: post #117
cde-v wrote: post #107

Earlier quoted context omitted.

Ok, I'm starting a new bank and everyone will be able to withdraw all at once, bank runs will be a thing of the past, your interest rate will be 0.00000000000000000000000000000000000000000000000125%

Sounds fine by me. I get better returns investing in index funds anyway, my bank account is literally just somewhere to park my liquid money and direct my paycheck to because stuffing it under my mattress would be too unsafe. Banks should differentiate between accounts where you're safely parking your money, and accounts that are actually low risk investments. And they ideally would offer both of those things. I see…

Banks do differentiate. If you have an account that is <$250K, you're covered by the FDIC, which essentially makes it zero risk, irrespective of the account's associated interest payments.

Re: SVB Hall of Shame

#305

Post by hnfong »

462436347 wrote: post #299
hnfong wrote: post #283

Earlier quoted context omitted.

In a textbook prisoner's dilemma, the prisoners both get a hefty sentence if they failed to cooperate and both defected. They had a lot to gain from cooperating. In the SVB situation, most of the losses are borne by the bank, investors of the bank, and the general public (in the sense that it caused financial instability across the nation). It's not a prisoner's dilemma because the downside to not cooperating is main…

The VCs started the bank run . They were the primary depositor base of SVB. It wasn't a question of whether it was rational or ethical to join a bank run already in progress. Instead it was they, the rational, enlightened VCs, who started the bank run in the first place, becoming prisoners of a dilemma of their own making. It was in their best interest to cooperate to not run on their bank, and they failed to do so,…

I think it's really ridiculous for anyone to assert with a straight face that bank customers have a moral responsibility to keep money in a bank that's failing and under water. It's even more ridiculous for a bunch of tech VCs to be responsible for a country's financial health and stability of the banking system.

I don't think banks are "evil" and I don't think anyone has commented to that effect here. They're just responsible for this mess.

Re: SVB Hall of Shame

#306

Post by danielmarkbruce »

ineedasername wrote: post #295
danielmarkbruce wrote: post #205

Earlier quoted context omitted.

Nonsense. Things one can sell at fair value in a few mins are liquid, and things one has to sell slowly or take 80 cents on the dollar to get rid of it fast (like a house in your example) are illiquid. It's a function of buyers and process, not my accounting treatment or tax treatment or whatever other treatment might make me not like the idea of selling right now. What's next? The FX markets aren't liquid because I…

Taking 80 cents on the dollar == illiquid is exactly the point I was making. Selling quickly is a necessary but not sufficient condition to meet the definition of liquid. That 80 bil in bonds isn't liquid if they had it on the books as hold-to-maturity and took a haircut to sell it early. >Yeah, it is, to us in the financial world. I get the feeling we're talking around each other, your response indicates that we (pr…

>> Taking 80 cents on the dollar == illiquid is exactly the point I was making.

The comment you were replying to said "quickly and at fair value".

Re: SVB Hall of Shame

#307

Post by gmd63 »

erik_seaberg wrote: post #290
gmd63 wrote: post #222

As I post this, the original post has 360 points posted 3 hours ago and is ranked lower than a post with 260 posted 14 hours ago. Interesting.

Scores decay over time; HN doesn’t want the same high scoring articles stuck to the front page forever. http://www.righto.com/2013/11/how-hacker-news-ranking-really...

Yes. But as I mentioned, there was an older, lower scoring article that was ranked higher than this one while it was fresh (~3 hours old)
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