"It has been estimated US banks are sitting on $630bn of losses on these investments. This only becomes an issue where they have to sell those bonds and realise the loss.
This is what happened to SVB. It stuck $91bn of customer deposits into long-term securities which have now fallen in value. A run on the bank forced it to sell some of those bonds at a loss, which triggered a need to raise new capital. It failed to do this.
It is extraordinary that a bank dedicated to one sector (tech), which has come under pressure, would invest so much deposit money into a single asset category which itself is vulnerable to higher interest rates.
SVB’s balance sheet investments were vulnerable to rising interest rates. So were its customers. It beggars belief that regulators did not tap SVB on the shoulder and ask about the risks involved here.
This become political to some extent as Republicans in the US have been pushing for less regulation instead of more."
...
No comments:
Post a Comment