3 ms·

If one were, in theory, to have the working capital for one’s employer tied up in this bank, how bad is it? Going to miss payroll bad?

fairity 4y ago
The facts are: - All funds in SVB are frozen - FDIC has implied that insured funds (up to $250K per account) will be released within 7 days. - It's entirely unclear how long it will take to recoup uninsured funds (above $250K per account). - It's also unclear how much of uninsured funds will be recouped (although most people believe the figure will be above 80%) If given the above fact pattern, your company can't make payroll, then it will have to raise emergency cash to do so. Whether or not that's feasible isn't an answer anyone here can provide.
- jdhn 4y ago
  >It's also unclear how much of uninsured funds will be recouped (although most people believe the figure will be above 80%) Where is this 80% number coming from?
  - fairity 4y ago
    The FDIC's statement shared that: As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits The question is what haircut the FDIC will take on the $209b when they forcefully liquidate all securities. If the above data is still accurate, the FDIC can make depositors whole as long as they don't take more than a 16% haircut when liquidating. SVB recently liquidated their AFS bond portfolio at ~90c on the dollar. And, this traunch of securities is very sensitive to interest rate changes. Their HTM bond portfolio consists mostly of securities that could be sold today for ~80c on the dollar. Given the above, it seems likely depositors will be made close to whole. Then again, who knows what's hidden from public eye. https://www.fdic.gov/news/press-releases/2023/pr23016.html https://www.fdic.gov/news/press-releases/2023/pr23016.html
    - mkagenius 4y ago
      At the very least the 20b from yesterday will be there right? So atleast 10%
- kevinpet 4y ago
  this is incorrect: "FDIC has implied that insured funds (up to $250K per account) will be released within 7 days." Specifically, the FDIC has explicitly stated (rather than implied) that insured funds will be released on Monday (rather than within 7 days). https://www.fdic.gov/news/press-releases/2023/pr23016.html https://www.fdic.gov/news/press-releases/2023/pr23016.html The same statement also says "The FDIC will pay uninsured depositors an advance dividend within the next week." which I assume means some percentage of the uninsured funds based on a worst case scenario of the recovery. Another issue is that this isn't just about the company not having funds, but also funds that may have been transiting through SVB today. At least one payroll provider was affected.
- eek2121 4y ago
  - It's also unclear how much of uninsured funds will be recouped (although most people believe the figure will be above 80%) How much would you pay for a property that will instantly be worth 20% less than the day you purchased it? In normal times I can see it, but we all know (or most of the smart folks, at least) that the economy is on the brink of falling over. Note that before this news broke out, SVB shares were frozen. If this were simply a 20% loss?
HideousKojima 4y ago
FDIC only covers $250,000 per depositor per bank per account type, so it depends on how many employees are making how much money. $250k is enough to pay about 20 employees who make ~$150k a year for another month, to give you a rough idea. So it depends on how many employees your employer has and how much they get paid on average. Also it depends on how much incoming revenue your employer has.

fairity 4y ago

The facts are: - All funds in SVB are frozen - FDIC has implied that insured funds (up to $250K per account) will be released within 7 days. - It's entirely unclear how long it will take to recoup uninsured funds (above $250K per account). - It's also unclear how much of uninsured funds will be recouped (although most people believe the figure will be above 80%) If given the above fact pattern, your company can't make payroll, then it will have to raise emergency cash to do so. Whether or not that's feasible isn't an answer anyone here can provide.

jdhn 4y ago
>It's also unclear how much of uninsured funds will be recouped (although most people believe the figure will be above 80%) Where is this 80% number coming from?
- fairity 4y ago
  The FDIC's statement shared that: As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits The question is what haircut the FDIC will take on the $209b when they forcefully liquidate all securities. If the above data is still accurate, the FDIC can make depositors whole as long as they don't take more than a 16% haircut when liquidating. SVB recently liquidated their AFS bond portfolio at ~90c on the dollar. And, this traunch of securities is very sensitive to interest rate changes. Their HTM bond portfolio consists mostly of securities that could be sold today for ~80c on the dollar. Given the above, it seems likely depositors will be made close to whole. Then again, who knows what's hidden from public eye. https://www.fdic.gov/news/press-releases/2023/pr23016.html https://www.fdic.gov/news/press-releases/2023/pr23016.html
  - mkagenius 4y ago
    At the very least the 20b from yesterday will be there right? So atleast 10%
kevinpet 4y ago
this is incorrect: "FDIC has implied that insured funds (up to $250K per account) will be released within 7 days." Specifically, the FDIC has explicitly stated (rather than implied) that insured funds will be released on Monday (rather than within 7 days). https://www.fdic.gov/news/press-releases/2023/pr23016.html https://www.fdic.gov/news/press-releases/2023/pr23016.html The same statement also says "The FDIC will pay uninsured depositors an advance dividend within the next week." which I assume means some percentage of the uninsured funds based on a worst case scenario of the recovery. Another issue is that this isn't just about the company not having funds, but also funds that may have been transiting through SVB today. At least one payroll provider was affected.
eek2121 4y ago
- It's also unclear how much of uninsured funds will be recouped (although most people believe the figure will be above 80%) How much would you pay for a property that will instantly be worth 20% less than the day you purchased it? In normal times I can see it, but we all know (or most of the smart folks, at least) that the economy is on the brink of falling over. Note that before this news broke out, SVB shares were frozen. If this were simply a 20% loss?

HideousKojima 4y ago

FDIC only covers $250,000 per depositor per bank per account type, so it depends on how many employees are making how much money. $250k is enough to pay about 20 employees who make ~$150k a year for another month, to give you a rough idea. So it depends on how many employees your employer has and how much they get paid on average. Also it depends on how much incoming revenue your employer has.