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Yes, but it’s pretty much always been problematic when a bank leader has had to make a statement akin to “We’re fine as long as there’s not a run”. That’s the

Yes, but it’s pretty much always been problematic when a bank leader has had to make a statement akin to “We’re fine as long as there’s not a run”. That’s the kind of thing that only gets said when there’s some concern that there will be a run.

deleted 4y ago
[deleted]
dylan604 4y ago
except when all of banks failed their stress tests, a) who remembers, b) who cared when it was announced?
- FormerBandmate 4y ago
  All the banks passed their stress test this year https://www.federalreserve.gov/newsevents/pressreleases/bcreg20220623a.htm https://www.federalreserve.gov/newsevents/pressreleases/bcre...
- orangepurple 4y ago
  Regulators have been putting immense pressure on big banks to hold adequate capital reserves since 2008 and they have been especially turning up the heat for the last 5 years. Moreover, it is clear that regulators will never allow a US bank to hold more than 3% of assets as crypto ever again.
  - makomk 4y ago
    Those government-mandated, ultra-safe capital reserves look like they're actually the big problem that's going to bring down banks right now. Banks have stuck a bunch of their reserves in really safe, predictable, high quality long-term bonds (particularly government issued ones). Because interest rates have gone up, those bonds are now worth substantially less than they were a year or so ago, meaning that the banks' ability to cope with people and businesses withdrawing their deposits has gone down substantially.
    - ttt333 4y ago
      respectfully, I'm not so sure. The decline in bonds applies to all fixed-rate securities. The only alternatives would have been just straight up cash (bad with inflation) or riskier, less-liquid assets (non-tradable loans with floating rates, for example). They are limited on the latter by risk weighting, and I'm not sure having looser risk controls on the asset side would really help confidence in the banking sector. please feel free to disagree!
      - Retric 4y ago
        Inflation isn’t a concern here. Depositors hand a bank 1 billion and X% inflation hits, well the bank still only owes them 1 billion.
        ttt333 4y ago
        Yeah that's true, it matter more for net-interest-margin / interest income generation in a rising-rate environment. Good point
        zamnos 4y ago
        a depositor isn't going to deposit 1 billion and only expect 1 billion back out months later. that's some poor people shit. Large sums of money like that, banks pay you for the pleasure of holding it. So a bank offering 4.5% APY like SVB offers would owe an extra 3.2 million to the billionaire if they look at their account a month later. The problem is, the underlying assets that SVB owns will only pay them back at 1% APY, and only in 20 years or whatever, and the billionaire has been promised 4.5%APY and is expecting to have access to one months worth of interest next month. that 3.5 difference is thus a huge problem for SVB.
      - aftbit 4y ago
        Could they instead hold short-term treasuries (as short as 4 weeks, I believe) and refuse to honor large withdraws until they mature?
        4y ago
  - eshack94 4y ago
    Pardon my ignorance (not a crypto guy) — what is it that you're referencing when you mention a bank holding 3% of assets as crypto? My uninformed assumption is that this is either about Silvergate, or something related to SBF's debacle. Just curious. As mentioned, I'm pretty ignorant about this and would like to educate myself.
    - orangepurple 4y ago
      As part of a general crackdown happening right now regulators put any crypto plans US banks may have had on ice.
FormerBandmate 4y ago
They’re selling equity to get capital. That’s pretty dire straits, FTX was doing that before they went under (I’m not saying this is FTX, I’m just saying it can be akin to the nuclear option)
- axlee 4y ago
  FTX's actions have nothing to do with what is happening with SVB, it's not even close. Why make a bad parallel?
  - Narkov 4y ago
    The parallel is selling equity when you are in trouble is not ideal. Different reasons or sectors or whatever...but the principal is the same.
    - hd95489 4y ago
      I mean it’s just as bad as buying it at the peak.
  - FormerBandmate 4y ago
    Their emergency stock sale was a key sign of their implosion. Healthy financial institutions never do this
- hollerith 4y ago
  For what reason besides raising cash does a company ever sell shares in itself? How does your statement make any sense? (I am assuming that by "capital" you mean cash.)
  - tyre 4y ago
    Because in this case it’s a bank and they aren’t selling equity to invest in new business/products. SVB had to liquidate good assets quickly, so it sold them at a loss. That means its capitalization compared to liabilities (deposits) could be in “uh oh” territory. So it sells capital on the open market to shore up its liquid capital. Yes, most every capital raise works mostly like this. But it’s notable here because of what it portends.
JKCalhoun 4y ago
We're fine as long as we don't hit an iceberg.

deleted 4y ago

[deleted]

dylan604 4y ago

except when all of banks failed their stress tests, a) who remembers, b) who cared when it was announced?

FormerBandmate 4y ago
All the banks passed their stress test this year https://www.federalreserve.gov/newsevents/pressreleases/bcreg20220623a.htm https://www.federalreserve.gov/newsevents/pressreleases/bcre...
orangepurple 4y ago
Regulators have been putting immense pressure on big banks to hold adequate capital reserves since 2008 and they have been especially turning up the heat for the last 5 years. Moreover, it is clear that regulators will never allow a US bank to hold more than 3% of assets as crypto ever again.
- makomk 4y ago
  Those government-mandated, ultra-safe capital reserves look like they're actually the big problem that's going to bring down banks right now. Banks have stuck a bunch of their reserves in really safe, predictable, high quality long-term bonds (particularly government issued ones). Because interest rates have gone up, those bonds are now worth substantially less than they were a year or so ago, meaning that the banks' ability to cope with people and businesses withdrawing their deposits has gone down substantially.
  - ttt333 4y ago
    respectfully, I'm not so sure. The decline in bonds applies to all fixed-rate securities. The only alternatives would have been just straight up cash (bad with inflation) or riskier, less-liquid assets (non-tradable loans with floating rates, for example). They are limited on the latter by risk weighting, and I'm not sure having looser risk controls on the asset side would really help confidence in the banking sector. please feel free to disagree!
    - Retric 4y ago
      Inflation isn’t a concern here. Depositors hand a bank 1 billion and X% inflation hits, well the bank still only owes them 1 billion.
      - ttt333 4y ago
        Yeah that's true, it matter more for net-interest-margin / interest income generation in a rising-rate environment. Good point
      - zamnos 4y ago
        a depositor isn't going to deposit 1 billion and only expect 1 billion back out months later. that's some poor people shit. Large sums of money like that, banks pay you for the pleasure of holding it. So a bank offering 4.5% APY like SVB offers would owe an extra 3.2 million to the billionaire if they look at their account a month later. The problem is, the underlying assets that SVB owns will only pay them back at 1% APY, and only in 20 years or whatever, and the billionaire has been promised 4.5%APY and is expecting to have access to one months worth of interest next month. that 3.5 difference is thus a huge problem for SVB.
    - aftbit 4y ago
      Could they instead hold short-term treasuries (as short as 4 weeks, I believe) and refuse to honor large withdraws until they mature?
      - 4y ago
- eshack94 4y ago
  Pardon my ignorance (not a crypto guy) — what is it that you're referencing when you mention a bank holding 3% of assets as crypto? My uninformed assumption is that this is either about Silvergate, or something related to SBF's debacle. Just curious. As mentioned, I'm pretty ignorant about this and would like to educate myself.
  - orangepurple 4y ago
    As part of a general crackdown happening right now regulators put any crypto plans US banks may have had on ice.

FormerBandmate 4y ago

They’re selling equity to get capital. That’s pretty dire straits, FTX was doing that before they went under (I’m not saying this is FTX, I’m just saying it can be akin to the nuclear option)

axlee 4y ago
FTX's actions have nothing to do with what is happening with SVB, it's not even close. Why make a bad parallel?
- Narkov 4y ago
  The parallel is selling equity when you are in trouble is not ideal. Different reasons or sectors or whatever...but the principal is the same.
  - hd95489 4y ago
    I mean it’s just as bad as buying it at the peak.
- FormerBandmate 4y ago
  Their emergency stock sale was a key sign of their implosion. Healthy financial institutions never do this
hollerith 4y ago
For what reason besides raising cash does a company ever sell shares in itself? How does your statement make any sense? (I am assuming that by "capital" you mean cash.)
- tyre 4y ago
  Because in this case it’s a bank and they aren’t selling equity to invest in new business/products. SVB had to liquidate good assets quickly, so it sold them at a loss. That means its capitalization compared to liabilities (deposits) could be in “uh oh” territory. So it sells capital on the open market to shore up its liquid capital. Yes, most every capital raise works mostly like this. But it’s notable here because of what it portends.

JKCalhoun 4y ago

We're fine as long as we don't hit an iceberg.