The Second-Biggest Bank Failure

Saw that today:

How Silicon Valley Bank’s Failure Compares to Other Major Collapses - The New York Times.

So far unclear, what implications that will have.

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From Matt Levine it sounds like this bank was unusually exposed to interest risks, which should limit contagion risk at least in the banking sector.

Not sure how that will impact VC/tech tho.

Also it sounds like uninsured deposit holders are likely to be made whole. (At least there will be a strong push)


Does anyone on the forum have any insights how hard Swiss 2nd pillar pension funds are being hit by decline in bond prices?

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It mainly depends on whether they are forced to sell those securities with a loss or can afford to wait for them to mature. They can also hedge big investments on bonds with interest rate swaps. The bank that failed clearly did poor risk management and did not have adequate liquidity management which is ridiculous for a 200 billion bank… They decided to go almost all in on long duration interest rate products (US T bonds and MBS) and basically bought the top of the market lol.


Pension fund performance in 2022:

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non-zero chance this is just a start (domino, credit cycle, monetary policy, money supply, lending standards, next leg down)

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On Monday FDIC will tell the client how much they can get straight away (through the insurance mechanism and highly liquid assets) but you have to imagine that for 50% of all silicon valley startups it was their current accounts through which they paid salaries or bills. So the effects are tangible ^^

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What surprised me when reading posts about this on Twitter: Why do Startups hold >$10M in a bank with ~0% interest when 30 day T-Bills are yielding >4%? You should know your monthly burn roughly (and T-Bills are some of the most liquid instruments, so it’s not a problem if you need some more money), so they are voluntarily missing out on >$400k per year?

They’re small and don’t yet have a CFO etc.?

I guess that could be the problem, but do you really need a CFO for that? :laughing: You go to IBKR and click on 3 buttons or as a US company you can even use directly. Everyone should be able to do that.

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Perhaps if they burn $10M per year they don’t care about the extra $400k :wink:.

Yeah but you assume you have founders with lots of financial knowledge, not sure that that’s true :smile:

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Yes, the FDIC insures up to $250k in customer deposits. For cash burning startups, SVB’s primary customer, that’s a single month’s expenses.


The will also give advances on whatever can easily be salvaged from the bank balance sheet. So these clients should get more than the 250k.

“How exactly you can buy T-Bill in IB? I thought that’s not possible for retail.”
Actually, quick google answer the question.
IB interest on USD is 3.6%, T-Bills should come close to 5% to closed maturity (I assume IB is secondary market where rates are different from, thus hard to validate on weekend).
Seems like no brainer for someone who holds 50k usd or so since 3 month are not that long period to lock capital. CH taxation I understand also do not different on interest on cash or bond.
I’m I missing something?

I recently watched this video which gives insights into the work of the FDIC after a takeover of a bank. Really interesting!

And now it actually happened. :sweat_smile: Looking forward to how they handle it tomorrow…


Depositors are made whole, stockholders and some unsecured debt holders aren’t. Another bank (New York’s Signature Bank) is receiving the same treatment.

Sounds good to maintening confidence in the system, it feels like we really have learnt from the errors of the past. They have to play the game on hard mode (because everything is on the brink of turning bad) but they are doing it masterfully, I think.

Edit: S&P Futures are up 1.3%. :slight_smile:


But the USD is down again compared to the CHF :frowning:


Yeah, less interest rate hikes have been priced in.

Interesting point: the $250k limit has disappeared!

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