If one were, in theory, to have the working capital for one’s employer tied up in this bank, how bad is it?
Going to miss payroll bad?
Going to miss payroll bad?
- All funds in SVB are frozen
- FDIC has implied that insured funds (up to $250K per account) will be released within 7 days.
- It's entirely unclear how long it will take to recoup uninsured funds (above $250K per account).
- It's also unclear how much of uninsured funds will be recouped (although most people believe the figure will be above 80%)
If given the above fact pattern, your company can't make payroll, then it will have to raise emergency cash to do so. Whether or not that's feasible isn't an answer anyone here can provide.
Where is this 80% number coming from?
The question is what haircut the FDIC will take on the $209b when they forcefully liquidate all securities. If the above data is still accurate, the FDIC can make depositors whole as long as they don't take more than a 16% haircut when liquidating.
SVB recently liquidated their AFS bond portfolio at ~90c on the dollar. And, this traunch of securities is very sensitive to interest rate changes.
Their HTM bond portfolio consists mostly of securities that could be sold today for ~80c on the dollar.
Given the above, it seems likely depositors will be made close to whole. Then again, who knows what's hidden from public eye.
The same statement also says "The FDIC will pay uninsured depositors an advance dividend within the next week." which I assume means some percentage of the uninsured funds based on a worst case scenario of the recovery.
Another issue is that this isn't just about the company not having funds, but also funds that may have been transiting through SVB today. At least one payroll provider was affected.
How much would you pay for a property that will instantly be worth 20% less than the day you purchased it?
In normal times I can see it, but we all know (or most of the smart folks, at least) that the economy is on the brink of falling over.
Note that before this news broke out, SVB shares were frozen. If this were simply a 20% loss?