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You’re missing a big part of this, banks with good risk management hedged these positions. SVB did not, they also did not have a chief risk officer.
by nscalf 4y ago
You’re missing a big part of this, banks with good risk management hedged these positions. SVB did not, they also did not have a chief risk officer.
- lumost 4y agoHow many banks are in the same boat? How many banks are dependent on these other banks not to be in this boat? There have been discussions for the last decade that finance institutions have been looking the other way on smaller firm practices as it lets them make more money. If the risks taken are greater than 10 years long, then everyone has gotten paid out by the time there is a problem.
- nscalf 4y agoI think the biggest concern with SVB was about the contagion risk because we didn’t know to what extent they were the counter party for other banks risk management. If you hedged your low interest bonds via options with SVB holding the other end of that, your options are toast. Now you own all that risk.
- avelis 4y agoNo chief risk officer?!?!?! Damn! Kind of like the movie Margin Call. Can't see the risk if you fire the entire department and promote a shill that goes along with it all.
- nscalf 4y agoAbsolutely nuts. It’s apparently been 8 months with no CRO.