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IIUC, they were technically insolvent and desperately trying for an equity raise first, then people took out their money.
by dahdum 4y ago
IIUC, they were technically insolvent and desperately trying for an equity raise first, then people took out their money.
- rnk 4y agoAnd this is well explained in many places. SVB had deposits, many over 250k. They bought long term us govt bonds with rates available at the time. Then rates went up quite a bit over a short term. The old bonds lost value, because new bonds had higher rates, making the old bonds with lower rates worth less. These were effectively losses that were not yet recognized. The bank must have bought new bonds with new deposits as rates went up. But they still have loses on their old bonds, those more than a year old or so. That could have been a lot of money. Then when lots of people starting taking their money out, they had to sell some of those lower rate, lower valued (losses) bonds to pay those people out. This increased as more people started taking their money out, eventually the bank lost all its capital through these "old bond w lower rates losses". This is fascinating, but also impactful because probably lots of banks have the same problem in the us.