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Ah, I see. I misunderstood something I read earlier. Silicon Valley Bank had to sell Treasuries at a $1.8B loss which caused them to not meet capital ratio requ
by dataviz1000 4y ago
Ah, I see. I misunderstood something I read earlier. Silicon Valley Bank had to sell Treasuries at a $1.8B loss which caused them to not meet capital ratio requirements. Their problem was a combination of their bond holdings decreasing in value and a bank run forcing them to sell the bonds at the discounted rate.
- bradleyjg 4y agoSort-of, yes. But bank run makes it sound like something immoral or at least irrational. A bank that’s insolvent (has greater liabilities than assets) should expect and deserves a bank run. The bad version of a bank run is when a bank is solvent but illiquid. It has a bunch of loans that are preforming and haven’t lost value due to interest rate changes, but there’s no easy way to sell them because they are just individual loan agreements between the bank and some borrowers. But again, that’s not what happened here. The bank was in trouble because its assets were worth* less than it’s obligations. * in the only sense of worth that matters