4 ms·

Do other US financial institutions have the same exposures, or is this a one-off situation based on SVB's closeness to the US tech sector?

resters 4y ago
SVB does a lot of venture debt. When venture debt is not repaid, SVB ends up owning the company, and can recover its exposure only if there is a buyer for the company or assets. In early stage land where valuations are the result of a fairly small consensus, it is plausible that SVB would have over-extended.
- willis936 4y ago
  Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in?
  - TuringNYC 4y ago
    >> Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in? As they say themselves, Category IV organizations, like SVBFG, are subject to supervisory stress tests conducted by the Fed "every other year." So you can get Stress Test results, but they will be stale. See Page 13 here: https://www.svb.com/globalassets/library/uploadedfiles/content/corporate/2021-sivb-10-k.pdf https://www.svb.com/globalassets/library/uploadedfiles/conte... Not sure if there are other ways to get tier ratios, would be curious if anyone else could chime in?
    - toomuchtodo 4y ago
      Too much latency with official reporting to suss out an insured institution going over the cliff, indicator would be SVB reps meeting with FDIC examiners around receivership and liquidation. Doors close on Friday, receiving bank opens all the branches back up as them on Monday. https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...
      - toomuchtodo 4y ago
        It is done. https://news.ycombinator.com/item?id=35096877 https://news.ycombinator.com/item?id=35096877
- hef19898 4y ago
  Stupid question, but should the investment arm of a bank be separated from the banking arm?
  - dmoy 4y ago
    They used to be, after glass stegall in the 1930s. this was a problem we learned during the 1920s That has since been...... relaxed gradually, and almost completely done away with under Clinton in the 1990s. And then <10 years later we got the 2007/2008 crisis. But, the original separation of investment and banking didn't get re-instated during the dodd frank stuff that came after the last crisis.
  - nradov 4y ago
    Maybe, but that's not relevant here. All banks invest their deposits in similar types of debt. SVB just made some bad decisions in terms of timing and liquidity, and now they have to recapitalize. If they can pull it off successfully then the bank will be fine but shareholders will get diluted.
- JumpCrisscross 4y ago
  > SVB does a lot of venture debt These losses aren’t related to SVB’s debt portfolio. It’s due to their deposits being flighty. SVB banks start-ups. Start-ups are spending cash faster than they’re getting it from VCs or customers. That leaves SVB with fewer deposits with which to fund their assets, so they must fire sell assets, which isn’t fun to do.
  - resters 4y ago
    Doesn't SVB require a startup to keep a certain amount of cash reserves deposited in order to be eligible for things like merchant accounts and other "free" financial services?
morninglight21 4y ago
does anyone have a list of venture debt firms exposed to this SVB collapse, like PFG which I believe had a close relation with SVB?

resters 4y ago

SVB does a lot of venture debt. When venture debt is not repaid, SVB ends up owning the company, and can recover its exposure only if there is a buyer for the company or assets. In early stage land where valuations are the result of a fairly small consensus, it is plausible that SVB would have over-extended.

willis936 4y ago
Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in?
- TuringNYC 4y ago
  >> Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in? As they say themselves, Category IV organizations, like SVBFG, are subject to supervisory stress tests conducted by the Fed "every other year." So you can get Stress Test results, but they will be stale. See Page 13 here: https://www.svb.com/globalassets/library/uploadedfiles/content/corporate/2021-sivb-10-k.pdf https://www.svb.com/globalassets/library/uploadedfiles/conte... Not sure if there are other ways to get tier ratios, would be curious if anyone else could chime in?
  - toomuchtodo 4y ago
    Too much latency with official reporting to suss out an insured institution going over the cliff, indicator would be SVB reps meeting with FDIC examiners around receivership and liquidation. Doors close on Friday, receiving bank opens all the branches back up as them on Monday. https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...
    - toomuchtodo 4y ago
      It is done. https://news.ycombinator.com/item?id=35096877 https://news.ycombinator.com/item?id=35096877
hef19898 4y ago
Stupid question, but should the investment arm of a bank be separated from the banking arm?
- dmoy 4y ago
  They used to be, after glass stegall in the 1930s. this was a problem we learned during the 1920s That has since been...... relaxed gradually, and almost completely done away with under Clinton in the 1990s. And then <10 years later we got the 2007/2008 crisis. But, the original separation of investment and banking didn't get re-instated during the dodd frank stuff that came after the last crisis.
- nradov 4y ago
  Maybe, but that's not relevant here. All banks invest their deposits in similar types of debt. SVB just made some bad decisions in terms of timing and liquidity, and now they have to recapitalize. If they can pull it off successfully then the bank will be fine but shareholders will get diluted.
JumpCrisscross 4y ago
> SVB does a lot of venture debt These losses aren’t related to SVB’s debt portfolio. It’s due to their deposits being flighty. SVB banks start-ups. Start-ups are spending cash faster than they’re getting it from VCs or customers. That leaves SVB with fewer deposits with which to fund their assets, so they must fire sell assets, which isn’t fun to do.
- resters 4y ago
  Doesn't SVB require a startup to keep a certain amount of cash reserves deposited in order to be eligible for things like merchant accounts and other "free" financial services?

morninglight21 4y ago

does anyone have a list of venture debt firms exposed to this SVB collapse, like PFG which I believe had a close relation with SVB?