Hacker News Reader

Comment by mathattack | Hacker News Reader

SVB wouldn’t have these issues if they monitored the risk better. If they put the money in short term govt bonds they would be fine. Or if they kept the rates they paid on deposits low to discourage the excess, they would also be fine.

Banks are in the business to manage risk.

The sad part is this risk management and investment process is concentrated in a very small group. Most of the bank employees are very good, had no idea what was happening, and some will lose their jobs as their equity goes to zero.

View on HN

This is correct, Banks can plan for this risk by aiming to match the duration of their liabilities, which includes deposits, to their assets. For example, if a bank is getting funding via a one-year certificate of deposit, it can buy a Treasury maturing in one year to match. But if a bank’s deposits can move at any moment, it has to weigh that risk when investing. Banks also diversify with assets that are floating rate, like many kinds of corporate loans or credit card loans. Few are at risk of needing to wind down so quickly. But many may still have to take actions throttling back on loan growth or raising more capital if the Fed keeps going and deposits flee more quickly than anticipated.

"SVB wouldn’t have these issues if they monitored the risk better."

Let's see what happens. If only SVB goes belly up, then yes, only SVB was the one that couldn't read the tea leaves of the government's actions. But if SVB is just the first of more banks that will go belly up, then perhaps it is not just an error on SVB's part.

If the tide goes out and certain groups turn out to be naked, we shouldn't blame the tide going out and try to prevent that.

Tide is a natural occurring phenomenon.

There is nothing natural about the interest rates policies and stimulus packages from the governments last couple of decades.

They’re still supposed to have swimsuits on, to continue the metaphor. If anything, their customers are relying on trusting them more during turbulence.

When interest rates are negative the bank could just stuff the cash in a mattress no? Why do they need to take risks? They don't HAVE to (except profit of course)

KI used to bank with a small credit union in Sunnyvale, CA - it was a tech credit union (cant recall the name of it ATM)

But they used to have a sheet they posted on the wall near the tellers - this was in 2007-2009 at the height of that particular financial fraud collapse (lehman, etc)

The sheet showed how much the bank was making on over draft fees - and every time I was in the bank I would check that number - and it was stunning to see as deeper we got into that recession, how much that number increased.

They were making about 500k per month on _overdraft_ fees alone...

That said a lot about the state of peoples finances alone.

Reply on news.ycombinator.com