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>Keep in mind 93% of SVB's assest were not FDIC insured. >> Silicon Valley Bank Had About $209.0B in Assets I'm not an expert, but aren't deposits in a bank l

>Keep in mind 93% of SVB's assest were not FDIC insured. >> Silicon Valley Bank Had About $209.0B in Assets I'm not an expert, but aren't deposits in a bank liabilities? Assets are things like treasury bills and loans held by the bank.

briandear 4y ago
When someone opens a bank account and makes a cash deposit, he/she surrenders the legal title to the cash, and it becomes an asset of the bank.
- ejstronge 4y ago
  > When someone opens a bank account and makes a cash deposit, he/she surrenders the legal title to the cash, and it becomes an asset of the bank. I think this is Google's first hit when one searches this, but I do not believe this is correct. Here is a source saying the opposite, as an example. A liability, in general terms, is something owed to another (e.g., a deposit) https://courses.lumenlearning.com/wm-macroeconomics/chapter/banking-profits-and-losses-name/ https://courses.lumenlearning.com/wm-macroeconomics/chapter/... And another more reputable source: https://www.investopedia.com/terms/b/bank-deposits.asp https://www.investopedia.com/terms/b/bank-deposits.asp
  - mytailorisrich 4y ago
    Not sure about banking rules but in general accounting terms: The deposited amount is an asset (the bank has got the cash) and a liability (the bank owes that amount to the person who made the deposit) and neutral on the balance sheet. Edit: Seems that this is what's explained in the investopedia article you linked to: "When someone opens a bank account and makes a cash deposit, he surrenders the legal title to the cash, and it becomes an asset of the bank. In turn, the account is a liability to the bank."
    - ejstronge 4y ago
      Yes, but the OP comment conflated assets (cash and securities as you mention) with FDIC insurance which only concerns liabilities due to depositors who qualify for FDIC insurance.
  - nordsieck 4y ago
    > I think this is Google's first hit when one searches this, but I do not believe this is correct. So, I think the person you are responding to is trying to explain the distinction between a bailment and a loan. Let's pretend that someone had a safety deposit box with $1B at SVB. They'd get to keep the full amount, because that is a bailment. The money never becomes the bank's. In contract, if someone deposited $1B at SVB, then the actual money becomes the property of SVB. And the depositor then is a creditor to SVB - they have an unsecured load to SVB of that amount. But after SVB gets taken over by the feds, they have to stand in line with the other creditors and get what they get. They aren't guaranteed to be made whole.
  - briandear 4y ago
    The another, more reputable source says exactly what I said. "The deposit itself is a liability owed by the bank to the depositor. Bank deposits refer to this liability rather than to the actual funds that have been deposited. When someone opens a bank account and makes a cash deposit, he surrenders the legal title to the cash, and it becomes an asset of the bank. In turn, the account is a liability to the bank." The ACCOUNT is the liability, the CASH is the asset.
- mhuffman 4y ago
  For a bank deposits are liabilities and loans are assets. edit: Judging by a quick downvote trigger-finger, there seems to be some folks having trouble believing this; check this out from the source: https://www.federalreserve.gov/releases/h8/current/ https://www.federalreserve.gov/releases/h8/current/ ... look at the category names of where deposits and loans are listed.
  - bob1029 4y ago
    The semantics of this are very cumbersome. The deposit itself is not a liability. The deposit account is. There are many ways to get money into a DDA. The bank will never give you your original paper currency back.
    - mhuffman 4y ago
      I agree with everything you say, but at a high level they "owe" you the money that you deposited. Which is a liability. They (generally) are not allowed to just go spend your money on anything they like (in the same way you could if you got a business loan, which is an asset and a liability), but it is prescribed how they can create assets with the deposits.
- bell-cot 4y ago
  It's an Accounting 101 situation ( https://en.wikipedia.org/wiki/Accounting_equation https://en.wikipedia.org/wiki/Accounting_equation ) - The (say) $100 cash I deposited to the bank becomes both an asset (they have "my" $100 in the vault) and a liability (they own me $100). So the accounting equation still balances.
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bell-cot 4y ago
Clearer to read it in the article: > As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.
dragontamer 4y ago
When Alice deposits $100 into a bank, the bank gains a $100 liability (owes Alice $100), and then a $100 asset (the cash). The asset is likely traded for a bond of some kind, in this case a US 10Y treasury. The 10Y treasury was worth $100 in 2021, but today is only worth $80. The bank still owes Alice $100 (a $100 liability), but the asset's value has declined. This has caused... issues... culminating in the past week of events.
- roflyear 4y ago
  It's somewhat confusing to me, because a $100 treasury note is only worth less than $100 if you try to sell it today. You still will get your $100 back if it matures.
  - ellisv 4y ago
    Yes but many people want their money today, not in 10 years.
    - roflyear 4y ago
      That's a bank run tho not "normal operating" status.
      - Jensson 4y ago
        Bank runs happens when you create conditions that can't handle bank runs. Nobody would worry about keeping assets at a Bank that wouldn't get destroyed if people started asking for their money. Therefore although bank runs aren't normal, they will almost surely happen to you if you put yourself in a situation where a bank run would destroy you. So you have to work as if bank runs are normal, or they will be normal.
  - dragontamer 4y ago
    Damn near the entire customer base of Silicon Valley Bank withdrew their money yesterday (Thursday), forcing SIVB to sell those 10-year notes.

briandear 4y ago

When someone opens a bank account and makes a cash deposit, he/she surrenders the legal title to the cash, and it becomes an asset of the bank.

ejstronge 4y ago
> When someone opens a bank account and makes a cash deposit, he/she surrenders the legal title to the cash, and it becomes an asset of the bank. I think this is Google's first hit when one searches this, but I do not believe this is correct. Here is a source saying the opposite, as an example. A liability, in general terms, is something owed to another (e.g., a deposit) https://courses.lumenlearning.com/wm-macroeconomics/chapter/banking-profits-and-losses-name/ https://courses.lumenlearning.com/wm-macroeconomics/chapter/... And another more reputable source: https://www.investopedia.com/terms/b/bank-deposits.asp https://www.investopedia.com/terms/b/bank-deposits.asp
- mytailorisrich 4y ago
  Not sure about banking rules but in general accounting terms: The deposited amount is an asset (the bank has got the cash) and a liability (the bank owes that amount to the person who made the deposit) and neutral on the balance sheet. Edit: Seems that this is what's explained in the investopedia article you linked to: "When someone opens a bank account and makes a cash deposit, he surrenders the legal title to the cash, and it becomes an asset of the bank. In turn, the account is a liability to the bank."
  - ejstronge 4y ago
    Yes, but the OP comment conflated assets (cash and securities as you mention) with FDIC insurance which only concerns liabilities due to depositors who qualify for FDIC insurance.
- nordsieck 4y ago
  > I think this is Google's first hit when one searches this, but I do not believe this is correct. So, I think the person you are responding to is trying to explain the distinction between a bailment and a loan. Let's pretend that someone had a safety deposit box with $1B at SVB. They'd get to keep the full amount, because that is a bailment. The money never becomes the bank's. In contract, if someone deposited $1B at SVB, then the actual money becomes the property of SVB. And the depositor then is a creditor to SVB - they have an unsecured load to SVB of that amount. But after SVB gets taken over by the feds, they have to stand in line with the other creditors and get what they get. They aren't guaranteed to be made whole.
- briandear 4y ago
  The another, more reputable source says exactly what I said. "The deposit itself is a liability owed by the bank to the depositor. Bank deposits refer to this liability rather than to the actual funds that have been deposited. When someone opens a bank account and makes a cash deposit, he surrenders the legal title to the cash, and it becomes an asset of the bank. In turn, the account is a liability to the bank." The ACCOUNT is the liability, the CASH is the asset.
mhuffman 4y ago
For a bank deposits are liabilities and loans are assets. edit: Judging by a quick downvote trigger-finger, there seems to be some folks having trouble believing this; check this out from the source: https://www.federalreserve.gov/releases/h8/current/ https://www.federalreserve.gov/releases/h8/current/ ... look at the category names of where deposits and loans are listed.
- bob1029 4y ago
  The semantics of this are very cumbersome. The deposit itself is not a liability. The deposit account is. There are many ways to get money into a DDA. The bank will never give you your original paper currency back.
  - mhuffman 4y ago
    I agree with everything you say, but at a high level they "owe" you the money that you deposited. Which is a liability. They (generally) are not allowed to just go spend your money on anything they like (in the same way you could if you got a business loan, which is an asset and a liability), but it is prescribed how they can create assets with the deposits.
bell-cot 4y ago
It's an Accounting 101 situation ( https://en.wikipedia.org/wiki/Accounting_equation https://en.wikipedia.org/wiki/Accounting_equation ) - The (say) $100 cash I deposited to the bank becomes both an asset (they have "my" $100 in the vault) and a liability (they own me $100). So the accounting equation still balances.
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deleted 4y ago

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bell-cot 4y ago

Clearer to read it in the article: > As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.

dragontamer 4y ago

When Alice deposits $100 into a bank, the bank gains a $100 liability (owes Alice $100), and then a $100 asset (the cash). The asset is likely traded for a bond of some kind, in this case a US 10Y treasury. The 10Y treasury was worth $100 in 2021, but today is only worth $80. The bank still owes Alice $100 (a $100 liability), but the asset's value has declined. This has caused... issues... culminating in the past week of events.

roflyear 4y ago
It's somewhat confusing to me, because a $100 treasury note is only worth less than $100 if you try to sell it today. You still will get your $100 back if it matures.
- ellisv 4y ago
  Yes but many people want their money today, not in 10 years.
  - roflyear 4y ago
    That's a bank run tho not "normal operating" status.
    - Jensson 4y ago
      Bank runs happens when you create conditions that can't handle bank runs. Nobody would worry about keeping assets at a Bank that wouldn't get destroyed if people started asking for their money. Therefore although bank runs aren't normal, they will almost surely happen to you if you put yourself in a situation where a bank run would destroy you. So you have to work as if bank runs are normal, or they will be normal.
- dragontamer 4y ago
  Damn near the entire customer base of Silicon Valley Bank withdrew their money yesterday (Thursday), forcing SIVB to sell those 10-year notes.