4 ms·

A lot of news about problems with Silicon Valley Bank.

• londons_explore 4y ago
  When Silicon Valley bank closes its doors, there will still be plenty of assets to give to account holders. I would guess nobody will lose more than 5-10% of what they had deposited. So it is interesting that it is causing such panic.
  • prasadjoglekar 4y ago
    The panic is always due to duration mismatch. A startup won't survive if cash is locked up for 90 days and you can't make payroll. unless a large benevolent buyer steps in, (remember Bear Sterns and JPM?), SiVB is toast. In fact both SI and SiVB are in trouble because they have long duration assets and short duration liabilities.
    • londons_explore 4y ago
      Yes, but the duration mismatch shouldn't be an issue here. I would happily loan money to a startup to make payroll, if that loan was 80% of the value of deposits they had in the collapsing SiVB, as long as the loan was secured with those deposits - that way I can be pretty certain I'm getting repaid, even if the startup goes bankrupt in the meantime.
      • prasadjoglekar 4y ago
        Bank balance sheets are the opposite of a general busibess. SiVB's deposits are their liabilities. Their MBS portfolio is their asset, which has been hammered by rising rates. The correct haircut on that is not 20%, it's more like 90%. The stock market is betting that equity holders of SiVB are going to get wiped out.
  • hluska 4y ago
    Losing 5-10% of runway because your bank went belly up should give any reasonable founder cause to panic.