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Not necessarily, since the gap in finances accumulated over time. They would have had to acknowledge asset price drops on their balance sheet much sooner. Basic
by chowchowchow 4y ago
Not necessarily, since the gap in finances accumulated over time. They would have had to acknowledge asset price drops on their balance sheet much sooner. Basically they were allowed to build up a bigger integration risk with their accounting if they ever did have to sell due to not having to MTM in the mean time.
- adolph 4y agoWas the accumulation duration larger than the regulatory mark-to-market period? As I understand it, SVG was heavy on US Treasuries, which lost a great deal of value due to recent interest rate hikes. As a result of a higher than expected deposit withdrawal rate, SVG sold US Treasuries for less than what they would have received if they had held them to maturity. If the gap in finances was discovered earlier, would they have just converted more equities and other long-term higher-yeild instruments into treasuries and then go under because they couldn't get returns to match their deposit interest rates?
- chowchowchow 4y agoHad they been marking their holdings regularly they would have sold their depreciated holdings sooner when losses were smaller, instead of waiting until they had to to cover withdrawals. Deposit interest is not fixed so that wouldn’t make them go under, they’d have to reduce their interest paid.