4 ms·

So they bought it for £1… and it has more assets than liabilities. Are these people dumb or something? Why would you sell that?

jimnotgym 4y ago
They have no choice, they are insolvent
- ldoughty 4y ago
  The UK branch was not at risk, and was in much better shape. Even if they had to close because their parents company was insolvent, you'd expect whomever is responsible for selling assets would want to get a better deal to get money back for shareholders.
  - raesene9 4y ago
    I'm not sure we know that SVB UK was actually in better shape. They made representations to that effect last week, but the fact the banking authorities moved in so quickly implies that all was not well. Of course if they have sold the assets for well under real value, you'd expect some level of legal challenge from the shareholders who are losing out under this deal.
  - KptMarchewa 4y ago
    It was at risk of a similar bank run, regardless of actual balance sheet.
    - capableweb 4y ago
      Is being at risk enough for the Bank of England to come in and shut you down? I have a feeling it has to be more than just "at risk" for something that drastic to happen.
  - celticninja 4y ago
    But they could be called upon to sell their assets at a loss to prop up the parent bank.
ldoughty 4y ago
I also don't understand it. From what I've been reading, the UK SVB bank was in significantly better shape... But there was a fear that people might also run on it as well out of fear/misunderstanding... And that is obviously bad for banks in general.
- capableweb 4y ago
  > the UK SVB bank was in significantly better shape The Bank of England seems to disagree with you. Not sure why they would think placing it into the "Bank Insolvency Procedure" is appropriate based on just rumors, they must sit on more information than both you and me.
rvnx 4y ago
The only logical reason that I see is that SVB UK is actually not in a good shape, and that they just copy-pasted the "good practices" of the parent company, and ended up in the same situation, but without the bank run yet. Otherwise, it's just a gift from gods, to pay 1 GBP for something worth 10B+ GBP and with 1B+ GBP in positive balance.
300bps 4y ago
You have it exactly backwards. To a bank, a loan is an asset and a deposit is a liability. SVB UK had loans of around £5.5bn and deposits of around £6.7bn
misja111 4y ago
SVB UK was declared insolvent as well last week: https://www.bloomberg.com/news/articles/2023-03-10/svb-s-uk-business-poised-to-be-put-into-resolution-ft-reports#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-03-10/svb-s-uk-... So I guess that the booked value of their assets was a lot higher than the actual market value, and so their net value is negative.
- kypro 4y ago
  Its accounting nonsense basically. Legally banks are allowed to value assets like bonds which they intend to hold to maturity at the original purchase value, because well, eventually they should get their money back. Issues only arise when they are forced to sell these assets because then they must acknowledge the fact they're not actually worth as much as the bank says they are. My guess is that mark-to-market the value of SVB UK's assets don't exceed total liabilities, in which case it makes no sense to purchase for their assets alone.

jimnotgym 4y ago

They have no choice, they are insolvent

ldoughty 4y ago
The UK branch was not at risk, and was in much better shape. Even if they had to close because their parents company was insolvent, you'd expect whomever is responsible for selling assets would want to get a better deal to get money back for shareholders.
- raesene9 4y ago
  I'm not sure we know that SVB UK was actually in better shape. They made representations to that effect last week, but the fact the banking authorities moved in so quickly implies that all was not well. Of course if they have sold the assets for well under real value, you'd expect some level of legal challenge from the shareholders who are losing out under this deal.
- KptMarchewa 4y ago
  It was at risk of a similar bank run, regardless of actual balance sheet.
  - capableweb 4y ago
    Is being at risk enough for the Bank of England to come in and shut you down? I have a feeling it has to be more than just "at risk" for something that drastic to happen.
- celticninja 4y ago
  But they could be called upon to sell their assets at a loss to prop up the parent bank.

ldoughty 4y ago

I also don't understand it. From what I've been reading, the UK SVB bank was in significantly better shape... But there was a fear that people might also run on it as well out of fear/misunderstanding... And that is obviously bad for banks in general.

capableweb 4y ago
> the UK SVB bank was in significantly better shape The Bank of England seems to disagree with you. Not sure why they would think placing it into the "Bank Insolvency Procedure" is appropriate based on just rumors, they must sit on more information than both you and me.

rvnx 4y ago

The only logical reason that I see is that SVB UK is actually not in a good shape, and that they just copy-pasted the "good practices" of the parent company, and ended up in the same situation, but without the bank run yet. Otherwise, it's just a gift from gods, to pay 1 GBP for something worth 10B+ GBP and with 1B+ GBP in positive balance.

300bps 4y ago

You have it exactly backwards. To a bank, a loan is an asset and a deposit is a liability. SVB UK had loans of around £5.5bn and deposits of around £6.7bn

misja111 4y ago

SVB UK was declared insolvent as well last week: https://www.bloomberg.com/news/articles/2023-03-10/svb-s-uk-business-poised-to-be-put-into-resolution-ft-reports#xj4y7vzkg https://www.bloomberg.com/news/articles/2023-03-10/svb-s-uk-... So I guess that the booked value of their assets was a lot higher than the actual market value, and so their net value is negative.

kypro 4y ago
Its accounting nonsense basically. Legally banks are allowed to value assets like bonds which they intend to hold to maturity at the original purchase value, because well, eventually they should get their money back. Issues only arise when they are forced to sell these assets because then they must acknowledge the fact they're not actually worth as much as the bank says they are. My guess is that mark-to-market the value of SVB UK's assets don't exceed total liabilities, in which case it makes no sense to purchase for their assets alone.