SVBUK Taken in to Insolvency | Hacker News Reader

SVBUK Taken in to Insolvency

bankofengland.co.uk

59 pointskrona40 comments

Saw this on the frontpage here on HN right after reading the article "Silicon Valley Bank shut down by regulators, UK arm confirms it’s a standalone independent entity"

> Silicon Valley Bank UK has moved to reassure UK clients and partners it is ring-fenced from the turmoil experienced by its parent US company.

> “As a reminder, Silicon Valley Bank UK is a standalone entity with its own balance sheet and governance structure. SVB has supported investors and innovators for 40 years and we have been so humbled with the consistent drum of support coming from our UK investor and founder community in last few days,” said Erin Platts, CEO and Head of EMEA.

> “We appreciate that this is a concerning time for our clients so we are working tirelessly to support them and give more context,” she added.

> The UK arm of the business told customers today that it operates as a standalone “independent banking institution” that is regulated and governed by the PRA in the UK.

> “Silicon Valley Bank UK fully abides by the UK regulatory requirements as covered by the Financial Services Compensation Scheme and by the Financial Ombudsman Service. SVB UK, Ltd. is ring-fenced from the parent and its other subsidiaries,” the company said.

https://www.altfi.com/article/10503_silicon-valley-bank-shut...

Guess they weren't as independent as they thought they were.

> Guess they weren't as independent as they thought they were.

Simply sharing the same name could be dependent enough to trigger bank run...

When they say not to panic... panic

Especially since the cost of panic is small for the individual but the risk of not doing it is huge

Unless you're in the top 1% of the country when it comes to savings and income, the risk is not that high, you have guaranteed access to up to £85,000 or even £170,000 for joint accounts. It seems that even those above 55, only have on average £20K saved.

Yea, im obviously talking about business accounts with over 250k. If less then yea the risk is smaller (you still risk loosing temporary access to your money).

That's for "haircuts".

Bankruptcies means money gone. Poof.

Not sure what you're talking about. This is from TFA:

> The Bank of England, absent any meaningful further information, intends to apply to the Court to place Silicon Valley Bank UK Limited (‘SVBUK’) into a Bank Insolvency Procedure. A Bank Insolvency Procedure would mean that eligible depositors are paid out by the FSCS as quickly as possible up to the protected limit of £85,000 or up to £170,000 for joint accounts.

From the FSCS:

> If you hold money with a UK-authorised bank, building society or credit union that fails, we’ll automatically compensate you.

> up to £85,000 per eligible person, per bank, building society or credit union.

> up to £170,000 for joint accounts.

It is not rational to start a bank run, but when there is a bank run, it is actually rational to participate.

When you see a bank in condition that a bank run would be a reasonable response, it is rational to pull your money out now. If enough people act rationally (or have that information) at the same time, then a bank run starts, by people acting rationally.

In the age of social networks, there's nothing but incessant outrage and instant panic.

"Panic moves at the speed of information." I read that on Schlock Mercenary (web comic), but the author may have stolen the idea from somewhere else.

> Guess they weren't as independent as they thought they were.

The BOE obviously knows a lot more than is letting on. My guess is the bank had the same investment strategy of its parent, but failed even without much of a panic from customers?!

According to the FT[1] SVB UK asked the BoE for £1.8 billion in short term funding on Friday. I'm not entirely surprised this was their answer.

[1] https://www.ft.com/content/e74dfe88-b372-4b57-9d7d-1a2600498... (possibly paywalled)

Did they suffer a run due to the name?

Wow. I hope this won’t spread further. Looking at DAX, Deutsche Bank shares dropped as well as HSBC.

When I first read the news, I thought about another hit for the crypto, however looking at what happens I’m a bit worried where will the avalanche reach next Monday.

Stay safe folks!

Both DB and HSBC have an LCR of around 130% so in theory able to sustain a bank run (depending on the magnitude - I think LCR is calibrated on a post Lehman scenario).

Why wouldn't events like this reinforce the value of crypto as an alternative to traditional big bank big gov't currency? It's operated in a completely different way that isn't based on debt creation.

Because crypto doesn’t change anything, exchanges had liquidity issues and went under in the same way as SVB did…

Crypto isn’t magic its just a glorified balance sheet.

And today it’s even more complicated since you need to exchange crypto for actual money so there is another layer of liquidity risk.

After Lehman Brothers filed for Chapter 11 in the US on Sep 15 2008, the UK regulators have shut down their UK branch immediately - on Sep 16. This was even before they were delisted from NYSE (Sep 17).

Can someone explain why so many American startups put their money on SVB? Why did VCs allow the startups they fund to put all the money in the same basket?

It's been asked and answered countless times in the submissions about SVB. Search through them.

Did the ”independent” SVBUK have the exakt same ”bond problem” as SVB in the US or is something else going on here?

Make no mistake, this bank failure is the first sign of a western capitalist and international depression. Too much liquidity followed by the hike in interest rates....works every time.

From Bloomberg:

“The issues at SVB have been like a cold shower and with the Fed having just countenanced the idea of faster hikes once again, the potential for a very unhappy equity market should the jobs data surprise on the upside is very real indeed,” James Athey, investment director at global investment company Abrdn, told Bloomberg. “It has always been the case that the sort of hikes we have seen from the Fed were going to cause problems somewhere,” he added.

The plan was to cause problems in the labor market. They wanted all types of companies including startups and banks to layoff lots of workers hoping many of those workers would become desperate and take any job at any wage which would drop labor prices and also inflation due to people having less money to spend.

Somehow they didn't understand that it is much easier to move money from low yield bank accounts to higher yield t-bills than to fire lots of employees and then rehire others at lower wages in an already tight labor market.

Those higher yield t-bills are a great way for banks to make money, too. SVB is a case of misreading the trend and getting caught out.

I see a ton of banks offering CDs at half a percent below the matching T-bills rate....

SBV is a symptom of the whole SV culture over the past few years. Crypto, Over Hiring, Over paying, 100x ARR valuations, are all tied together. A frenzy of greed and incompetence took over the industry (partially due to ZIRP), it all had to come crashing down at some point. Just like in 2007 when everyone said that houses only go up in price every year. That just isn't reality.

Wasnt this issue caused because SVB bought a long term, illiquid instrument?

I.e they made a rather individual choice to lock up most of their assets this way. Does that actually suggest this is more broadly systemic?

Did you mean Western capitalism or is Eastern capitalism some technical term that I'm unaware of?

Ha, yes, western capitalism. Corrected.

*inSolvency

> A Bank Insolvency Procedure would mean that eligible depositors are paid out by the FSCS as quickly as possible up to the protected limit of £85,000 or up to £170,000 for joint accounts

That was still £85k in the 2008 Financial Crisis.

Why does the Bank of England ignore inflation when it wants?

It makes Crypto safer, if it wasnt for the massive amounts of funny money aka fiat currency thats inflating crypto and then taking it down again!

>If I deposit a dollar in my bank account. Do I legally own that money? Or do I have a legal contract with the bank that they’ll give me back that money?

In the UK, no, the money becomes the property of the bank its been deposited with upto the £85,000 deposit protection scheme which has not gone up since the 2008 financial crisis.

https://www.bankofengland.co.uk/prudential-regulation/author...

Its the same in the US and other countries, the money on deposit is the property of the bank, which is why these central bank/Govt protection schemes exist in various countries.

Europe has the largest banking sector in the world, bigger than the US as its been established for longer.

Whats interesting with SVB is they chose to go in the opposite direction to what some call Basel 4 which others call Basel 3 or Basel 3.1.

Basel 3.1 is an international banking accord which came into force on the 1st Jan 2023, which forces banks to have more money on deposit in an attempt to compensate for the viral nature of the internet and modern day communications.

Todays Banks Runs are examples of the viral nature of the internet, and the US freedom of speech makes the US banking sector more vulnerable than the rest of the world when it comes to banking stability.

Throw in the US mindset typified by Facebook with their slogan "Move fast and break things" and this mindset is exposing and weakening the US banking sector.

Banking should be boring.

It will be interesting to see what big name US tech companies have been affected by SVB besides the lessor known unicorns, but right now I'm shorting the US tech sector in general.

If you are selling property in Silicon Valley and have had an offer, get the contracts signed and deal completed asap, Silicon Valley is going down.

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