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SVB was the only bank (or maybe one of the only banks) that allowed anyone to set up a bank account with them without visiting the country - they were a part of
by spaceman_2020 4y ago
SVB was the only bank (or maybe one of the only banks) that allowed anyone to set up a bank account with them without visiting the country - they were a part of Stripe Atlas.
That sounds great in a libertarian, everything goes world. But the reality is that there are plenty of bad actors and they will abuse it to launder money and commit fraud. Every other bank was conservative enough to avoid this by enforcing some basic in-person kyc/aml processes.
But not SVB. If you were banking with them, you should have asked yourself at least once: why is my bank doing something no other bank does? And is my money as safe there as it would be with a more conservative bank?
- zaroth 4y agoWhy take a random small program being run at the bank, and imply that it was somehow linked to their failure, when their failure is well understood and has nothing to do with the Atlas program?
- spaceman_2020 4y agoIf your bank is willing to take on excess risk in one area, it's reasonable to assume that it's also willing to take on excess risk in other areas. The very fact that it was catering to startups was high risk behavior. And let's not pretend that extending loans to 15 year old "startups" that have never made a dime in profits and have no clear exit path was a sound business.
- HPsquared 4y agoTheir problem wasn't customers defaulting on loans, wasn't criminal money laundering, wasn't crypto meltdowns. Their depositors were simply more flighty than average.
- zaroth 4y agoWho is pretending what about some made up thing that didn’t happen? The failure of SVB had nothing to do with extending loans to their client base.
- spaceman_2020 4y agoThe client base WAS a risk factor. It's business 101 that you need a diversified customer base. If you're too heavily concentrated in one industry, you're entirely exposed to any downturn in that industry. In this case, things were made even worse since SVB's customers were VC-funded startups, and VCs have an outsized say in the decisions made by VCs. Particularly in 2023 when we've seen startups shed more and more equity to VCs. If I was running a business similar to SVB, I would have asked myself if I was too over-exposed to VC-funded startups, and if those VCs were always going to play nice.
- toyg 4y ago> why is my bank doing something no other bank does? Well, that's an easy answer in techbro circles: because it's the smartest one, duuh.
- tekknik 4y ago> SVB was the only bank (or maybe one of the only banks) that allowed anyone to set up a bank account with them without visiting the country There are plenty of others, Ally being the next off the top of my head. This doesn’t, at all, free you from AML or KYC.