11 ms·

What other banks have the same issue?

• sexy_seedbox 4y ago
  We will find out on Monday.
• jpgvm 4y ago
  Likely plenty. Most of the smaller banks without sophisticated risk management likely haven't hedged against interest rate risk or adjusted their bond portfolios as interest rates rose. Unfortunately none of the regulatory frameworks even take interest rate risk into account, likely because of a 30 year bull run in bonds made everyone complacent to it. Generally speaking they only really monitor stress under a certain amount of bad debt (i.e failed loans) and risk level of assets held. T Bills get basically perfect zero risk score despite being heavily exposed to interest rate risk.
  • JumpCrisscross 4y ago
    > none of the regulatory frameworks even take interest rate risk into account This is false. The Fed’s stress tests and Basel III specifically measure duration.
    • jpgvm 4y ago
      They measure duration risk on short term assets but not long term assets like SVBs bonds which are (for better or worse) classified under different rules that allow them to be held to maturity without needing to account for mark-to-market losses for capital assessment purposes. As a result stress tests which measure various interest rate scenarios, deposit withdrawals and increased bad debt ratios aren't overly affected by these long duration bonds. That is all good and well as long as these assets truly are held to maturity and forced selling doesn't take place. Then again, maybe it's fine. These tests are meant to ensure the banks can handle changing economic conditions. They aren't meant to be able to protect banks against a bank run of this scale.
    • thuridas 4y ago
      Isn't that why 10 year bonds are much riskier?
      • JumpCrisscross 4y ago
        > why 10 year bonds are much riskier Yes, and why they yield more.