4 ms·

TBH, looks like they went belly up because of buying too many long term low yield bonds... Sort of the opposite of excessive risk really...

• di456 4y ago
  No, it was because they sold the bonds at a loss, triggering a loss of confidence and a bank run.
  • ambicapter 4y ago
    They sold the bonds at a loss because they suddenly needed to make a whole bunch of depositors whole. It was a bank run. The loss of confidence came before the loss of liquidity.
    • di456 4y ago
      There was some tail wagging the dog. Depositors wanted to be made whole because the bank had to disclose bond sale, bond purchase, and stock sale activities as a package deal. Each activity individually might have snuck under the radar, but together that spooked the depositors. Then the CEO says there's not a problem which you only need to say if there is a problem. That didn't help either.
• 542458 4y ago
  Well… SVB took on a lot of interest rate risk (rather than credit risk, which is what we’re more used to banks blowing themselves up with). Then rates rose and SVB were stuck holding long term fixed rate assets that weren’t yielding anywhere what they needed to. They probably didn’t see this as risk, since rates had been very stable for the last decade… but the mortgage market also sounded really safe in 2007. If they actually weren’t taking on risk they’d have bought short term bonds to avoid rate risk, but that wouldn’t have made them any money.