7 ms·

Q why didn't SVB limit withdrawals and transfers after this started. Could they?

by seydor 4y ago

bradleyjg 4y ago
No. A bank that refuses a demand on a demand deposit account is by definition in default.
- seydor 4y ago
  Unless it's capital controls
tills13 4y ago
I'm sure a bank limiting withdraws would have made matters even worse.
- mikepurvis 4y ago
  To be fair, though, that's kind of what's ended up happening for everyone anyway— at least the customers with >$250k on deposit.
fbdab103 4y ago
This is not a Bitcoin Exchange where the founders have the freedom to do whatever they want.
- seydor 4y ago
  It crashes like a crypto exchange though
  - JumpCrisscross 4y ago
    > crashes like a crypto exchange Where depositors get up to $250k the next business day and, possibly, up to 50% of the rest within a week?
  - rodgerd 4y ago
    FTX depositors would be over the moon if there was a promise that they were going to get a quarter million of their holdings back on Monday, with an unknown amount back in the next few weeks, and likely be "floated" some proportion of their holdings in the interim.
- latchkey 4y ago
  Just a friendly reminder that COIN is a public company.
dragontamer 4y ago
I don't think you're allowed to limit withdrawals on savings accounts or checking accounts. (Beyond the 6x monthly limit on savings) Money Market accounts are allowed to have limits (and haircuts) applied. Etc. etc. As a bank, they'd have different accounts with different rules on each kind of account. But Money Markets aren't allowed to be mixed with the long-term treasuries that SVB were holding. So it really depends on the mix of accounts, various regulations and such.
- fbdab103 4y ago
  The Money Market one probably comes as a surprise to many people (it did to me). I believe the financial industry lobbied so that the day-to-day Money Market fluctuations could be hidden from the user so that clients thought they were more stable than reality.
- TMWNN 4y ago
  > (Beyond the 6x monthly limit on savings) Hasn't been a thing for three years.
notfromhere 4y ago
Federal law
seanhunter 4y ago
My understanding is this isn't a "run on the bank" situation, they were too successful growing their deposit book and couldn't grow their loan assets fast enough to keep pace. So they bought a lot of MBS so they at least were earning some yield with which to pay interest on their deposit liabilities but took heavy losses when rates moved against them so were inadequately capitalised. They tried to raise additional capital and a couple of key miscommunications in that process really spooked the market and they suddenly collapsed.
- ec109685 4y ago
  SVB was offering above market interest rates though: According JPM: “At the end of 2022, SIVB only offered 0.60% more on deposits than its peers as compensation for the risks illustrated below; in 2021 this premium was 0.04%.”
  - dehrmann 4y ago
    You can find FDIC-insured savings accounts paying 4%, and bank interest rates are all over the places right now, so I wouldn't read into .6%. Calling out the 2021 number is disingenuous because the fed funds rate in 2021 was essentially 0%. Its's 4.57% right now. You're comparing kumquats and grapefruit.
    - ec109685 4y ago
      It shows they were being aggressive with their investments compared to parking things in the most safe vehicle possible: https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/silicon-valley-bank-failure-amv.pdf https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/ins...
- ru552 4y ago
  $40b was withdrawn Friday morning. If that’s not a run, I don’t know what is.
  - twelve40 4y ago
Animats 4y ago
They could have limited withdrawals before it started, but not after. Banks used to offer savings accounts, where the bank could impose a delay on withdrawals. That delay was once 30-60 days, then 7 days, and now it's mostly gone. This allowed small banks time to sell off some assets in the event of a sudden increase in withdrawals. In exchange for that, savings accounts paid higher interest. This was part of the dull and boring banking system designed in the 1930s. See "Savings and Loan Crisis" for how that ended.[1] [1] https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis
colechristensen 4y ago
They could not change the terms on accounts, no.

Q why didn't SVB limit withdrawals and transfers after this started. Could they?

by seydor 4y ago

Q why didn't SVB limit withdrawals and transfers after this started. Could they?

bradleyjg 4y ago

No. A bank that refuses a demand on a demand deposit account is by definition in default.

seydor 4y ago
Unless it's capital controls

tills13 4y ago

I'm sure a bank limiting withdraws would have made matters even worse.

mikepurvis 4y ago
To be fair, though, that's kind of what's ended up happening for everyone anyway— at least the customers with >$250k on deposit.

fbdab103 4y ago

This is not a Bitcoin Exchange where the founders have the freedom to do whatever they want.

seydor 4y ago
It crashes like a crypto exchange though
- JumpCrisscross 4y ago
  > crashes like a crypto exchange Where depositors get up to $250k the next business day and, possibly, up to 50% of the rest within a week?
- rodgerd 4y ago
  FTX depositors would be over the moon if there was a promise that they were going to get a quarter million of their holdings back on Monday, with an unknown amount back in the next few weeks, and likely be "floated" some proportion of their holdings in the interim.
latchkey 4y ago
Just a friendly reminder that COIN is a public company.

dragontamer 4y ago

I don't think you're allowed to limit withdrawals on savings accounts or checking accounts. (Beyond the 6x monthly limit on savings) Money Market accounts are allowed to have limits (and haircuts) applied. Etc. etc. As a bank, they'd have different accounts with different rules on each kind of account. But Money Markets aren't allowed to be mixed with the long-term treasuries that SVB were holding. So it really depends on the mix of accounts, various regulations and such.

fbdab103 4y ago
The Money Market one probably comes as a surprise to many people (it did to me). I believe the financial industry lobbied so that the day-to-day Money Market fluctuations could be hidden from the user so that clients thought they were more stable than reality.
TMWNN 4y ago
> (Beyond the 6x monthly limit on savings) Hasn't been a thing for three years.

notfromhere 4y ago

Federal law

seanhunter 4y ago

My understanding is this isn't a "run on the bank" situation, they were too successful growing their deposit book and couldn't grow their loan assets fast enough to keep pace. So they bought a lot of MBS so they at least were earning some yield with which to pay interest on their deposit liabilities but took heavy losses when rates moved against them so were inadequately capitalised. They tried to raise additional capital and a couple of key miscommunications in that process really spooked the market and they suddenly collapsed.

ec109685 4y ago
SVB was offering above market interest rates though: According JPM: “At the end of 2022, SIVB only offered 0.60% more on deposits than its peers as compensation for the risks illustrated below; in 2021 this premium was 0.04%.”
- dehrmann 4y ago
  You can find FDIC-insured savings accounts paying 4%, and bank interest rates are all over the places right now, so I wouldn't read into .6%. Calling out the 2021 number is disingenuous because the fed funds rate in 2021 was essentially 0%. Its's 4.57% right now. You're comparing kumquats and grapefruit.
  - ec109685 4y ago
    It shows they were being aggressive with their investments compared to parking things in the most safe vehicle possible: https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/silicon-valley-bank-failure-amv.pdf https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/ins...
ru552 4y ago
$40b was withdrawn Friday morning. If that’s not a run, I don’t know what is.
- twelve40 4y ago

Animats 4y ago

They could have limited withdrawals before it started, but not after. Banks used to offer savings accounts, where the bank could impose a delay on withdrawals. That delay was once 30-60 days, then 7 days, and now it's mostly gone. This allowed small banks time to sell off some assets in the event of a sudden increase in withdrawals. In exchange for that, savings accounts paid higher interest. This was part of the dull and boring banking system designed in the 1930s. See "Savings and Loan Crisis" for how that ended.[1] [1] https://en.wikipedia.org/wiki/Savings_and_loan_crisis https://en.wikipedia.org/wiki/Savings_and_loan_crisis

colechristensen 4y ago

They could not change the terms on accounts, no.