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What is “free money” and how does a big bank print money?

short_sells_poo 4y ago
They acquired a bunch of client assets for 1 GBP. Those client assets will generate money for them in the long term. For HSBC this is a great deal. For the clients too, come to think of it. On Friday the future of their money was uncertain, whereas today they can relax a bit because a big bank is backing them.
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- Teandw 4y ago
  They didn't acquire client assets for £1. That's not quite how it works.
- noobermin 4y ago
  Assuming of course clients don't fucking pull out the moment they can when svb uk reopens.
  - naijaboiler 4y ago
    Um "client assets" are liabilities to a bank
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  - actionablefiber 4y ago
    If you had deposits with SVB's UK arm before, congrats, you're now an HSBC customer. There is a much lower chance HSBC experiences a bank run. Not to jinx it but the most likely outcome is that most customers are satisfied that HSBC is a well-capitalized bank and keep their money there, while HSBC gets to use their deposits and the bank's assets to sit comfy earning yield.
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dan-robertson 4y ago
One point is that hsbc might not be acquiring all of the liabilities – they might mostly get customer deposits but not eg some unsecured loan or bond issue. Regulators could be ok with such an outcome because a bunch of businesses losing bank deposits may be seen as worse than a single company defaulting on its debt. Another is that SVB UK could be solvent so long as they don’t have to sell assets at a loss. Being part of hsbc stops the assets needing to be sold at a loss. And a separate thing is that even if the assets net liabilities are negative, the customer relationships could be valuable enough to hsbc to counteract that. Hsbc get a load of growing companies whom they can try sell banking services to. That assumes customers don’t all flee, but I don’t think they would because there isn’t a particular reason to fear hsbc in the way there was for SVB. I don’t know what the commenter meant about JPM printing money.
- shapefrog 4y ago
  > Being part of hsbc stops the assets needing to be sold at a loss Borrowing in the maket at 5% so you can keep the bonds paying 1% for the next 10 years might not seem like a "loss" but it is a loss.
  - dan-robertson 4y ago
    For sure that’s a reasonable possibility. But even if this in particular is -ve, I think it could still be a good deal for hsbc for the reasons given above and below.

They acquired a bunch of client assets for 1 GBP. Those client assets will generate money for them in the long term. For HSBC this is a great deal. For the clients too, come to think of it. On Friday the future of their money was uncertain, whereas today they can relax a bit because a big bank is backing them.

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Teandw 4y ago
They didn't acquire client assets for £1. That's not quite how it works.
noobermin 4y ago
Assuming of course clients don't fucking pull out the moment they can when svb uk reopens.
- naijaboiler 4y ago
  Um "client assets" are liabilities to a bank
  - deleted 4y ago
    [deleted]
- actionablefiber 4y ago
  If you had deposits with SVB's UK arm before, congrats, you're now an HSBC customer. There is a much lower chance HSBC experiences a bank run. Not to jinx it but the most likely outcome is that most customers are satisfied that HSBC is a well-capitalized bank and keep their money there, while HSBC gets to use their deposits and the bank's assets to sit comfy earning yield.
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dan-robertson 4y ago

One point is that hsbc might not be acquiring all of the liabilities – they might mostly get customer deposits but not eg some unsecured loan or bond issue. Regulators could be ok with such an outcome because a bunch of businesses losing bank deposits may be seen as worse than a single company defaulting on its debt. Another is that SVB UK could be solvent so long as they don’t have to sell assets at a loss. Being part of hsbc stops the assets needing to be sold at a loss. And a separate thing is that even if the assets net liabilities are negative, the customer relationships could be valuable enough to hsbc to counteract that. Hsbc get a load of growing companies whom they can try sell banking services to. That assumes customers don’t all flee, but I don’t think they would because there isn’t a particular reason to fear hsbc in the way there was for SVB. I don’t know what the commenter meant about JPM printing money.

shapefrog 4y ago
> Being part of hsbc stops the assets needing to be sold at a loss Borrowing in the maket at 5% so you can keep the bonds paying 1% for the next 10 years might not seem like a "loss" but it is a loss.
- dan-robertson 4y ago
  For sure that’s a reasonable possibility. But even if this in particular is -ve, I think it could still be a good deal for hsbc for the reasons given above and below.