Comment by tito | Hacker News Reader

Comment by tito | Hacker News Reader

SVB is our bank, I got in touch with a member of the senior team there and got the following message to share. (My own interpretation is I'm comfortable and I'm not planning to pursue it further at the moment):

As you know, we are limited in what we can share until the transaction formally closes next week but in the meantime I’m attaching concise information on the strength of our business, based on our recent mid-quarter update and financial announcements.

Our Moody’s Deposit Rating is Prime

Our credit ratings are also investment grade

SVB took action this week designed to:

Strengthen our financial position Enhance profitability Improve financial flexibility now and in the future

Our financial position enables us to take these strategic actions

SVB is well-capitalized Has a high-quality, liquid balance sheet Peer-leading capital ratios

Even before these actions:

We had ample liquidity and flexibility to manage our liquidity position SVB has one of the lowest loan-to-deposit ratios of any bank of our size

The improved cash liquidity, profitability and financial flexibility resulting from the actions we announced today will bolster our financial position and our ability to support clients through sustained market pressures.

>Moody

If the subprime crisis taught us anything it was that ratings go for marginally usefull to utterly useless the second sht gets real and there is actual stress in the system

Perfectly put

Let's see how credible those credit ratings are over the next few weeks or so

Why does everyone make these huge generalizations based on one crisis that happened 15 years ago?

The problem in 2008 was that splitting an investment into a senior "low-risk" one and a higher-risk one led to higher ratings overall than the initial investment warranted. Do you have any evidence that something like this is happening here, or that this is a systemic problem?

The mistake they're potentially making today doesn't have to be identical to the one made 15 years ago. The that they were so wrong 15 years ago means that we have to question literally every rating they have, and we can't just assume it's right

> The that they were so wrong 15 years ago

That seems like a weak signal. If the only example of egregiously wrong ratings we have is from the subprime crisis, that means they got them right enough a lot more often than not.

Well, most of the ratings are done based on financial statements. The problem we are seeing is that losses in held-to-maturity securities do not show up in these financial statements and might create a liquidity crunch in case of a bank run.

Pros:

SVB received all the capital it needed to cover the losses on its bond portfolio liquidations.

Cons:

The announcement of bond sale losses made everyone realize ever bank has a bunch of bonds at a loss if they don't hold to maturity, and SVB is going to need to sell any more of its bonds at a greater loss as more customers pull money out.

Pros:

The losses, percentage wise, aren't that great, so far. As long as perhaps greater than 90% of deposits don't leave then everyone can get paid out and its really business as usual.

Cons:

Large institutional investors are the biggest account holders and they're absolutely pulling out, alongside all of their portfolio companies.

Pros:

Other banks that are more liquid could step in and shore up the capital.

Cons:

- The fed [likely] won't be one of those banks (even if it just meant buying the bonds closer to par value) because that would mean a reversal of policy.

- This didn't help Silvergate bank and the new equity investors are at major losses too now, wiped out.

With the massive exodus of deposits though, their ratios change quite drastically. Maybe it wasn't a big issue yesterday, but as of today, they've got a huge problem on their hands.

You can pull up their financials from the SEC. They have gotten themselves into quite a pickle. They dusted between 10 and 15 bill on long term bonds. There is a decent chance that will sink them given everyone is pulling their money.

Of all those assurances, none addressed the 1 fear people have.

Aged like already spoiled milk. Hope you're OK.

thanks fam. figuring that out now.

i enjoyed reading this comment last night after it was posted 20 hours ago but i didn't think it was very likely to be correct

4 hours ago the fdic closed the bank

i'm curious whether your account was fully fdic insured or how much you stand to potentially lose if not

not fully fdic insured

deepest condolences and best wishes

welp, that didn't work out

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