Which is kinda fine? Means you might lose some business as others chase yield. But I feel like most startups don’t actually have that much cash in the bank so they shouldn’t really be chasing yield anyway.
It didn’t take a genius to predict interest rates were going to rise. Locking cash away for 10yrs in very low % return vehicles seems stupid?
Unless you are borrowing, then the opposite.
Depositors weren’t getting anything. I’m guessing SVB wanted yield for shareholders.
Everyone is a genius in hindsight. You could have made millions out of a few thousands if you were able to predict an interest rate regime change. But where are your millions?
Some banks did exactly that. Even now, when SVB is advertising 4.5% rates on business checking [1], First Republic Bank is offering 0.01% on Business Interest Checking [2]. But note that SVB's failure impacts all sorts of household names like Roku, Roblox, Coinbase, Stripe, while FRB reports that tech is only 4% of their business. Companies that don't offer yield lose out to companies that do in the yield-chasing competitive marketplace.
We're observing some form of anti-survivorship bias, where risky behavior was incentivized by the market, so market participants had to engage or get pushed out of the market, and so now we hear about the risky behavior because that's what failed. We're not talking about banks like FRB or Wells Fargo that offer 0% on their bank accounts.
[1] https://www.svb.com/business-banking/business-checking
[2] https://www.firstrepublic.com/current-deposit-rates?rateType...
It will also be interesting to see if someone is going to wind up in jail for initiating the bank run. Someone shared confidential info that started this whole thing.
I think insiders might not even have realized how bad their balance sheet looked. On the earnings call the CEO was talking about how much he likes cycling to de stress, etc