General > General Technical Chat
Silicon Valley Bank Collapses
tooki:
I think the key thing to remember in this instance is that SVP had not actually lost anything. It was strictly a liquidity issue — plenty of assets (more than enough to cover their liabilities and deposits), but far too little cash. If they’d been forced to sell the bonds prematurely (which they had bought instead of holding onto cash) they would have created actual losses. HSBC has now bought SVB, so HSBC’s liquidity can cover whatever deposits SVB’s customers want to withdraw, and once the bonds mature, HSBC will more than recover that.
As I understand it, the only real losers are SVB shareholders. I have no idea what HSBC ended up paying for the shares, but I’m guessing it won’t have been at a premium.
Also, at least for USA: yet another reason to use your local credit union! Better conditions, in my experience better service, and they’re not for profit (account holders are actually shareholders). At the Maryland credit union where I do my U.S. banking, there used to be a nice teller who remembered me. One time I had my dog in the car so I ran inside to grab a a form, and she happened to be at the front and saw me. I apologized that I had to be quick due to the dog, and she instead came outside, said hi to the dog, and then gave me curbside service (not a service they actually offer). That and other examples show me it’s a far more trustworthy place to put my money than commercial banks.
Another bonus: credit union deposits are government-insured, but not by the FDIC, but rather another fund. That means that if a commercial bank failure should wipe out the FDIC, credit union deposits are not affected.
tom66:
--- Quote from: tooki on March 14, 2023, 08:03:55 am ---I have no idea what HSBC ended up paying for the shares, but I’m guessing it won’t have been at a premium.
--- End quote ---
AFAIK, HSBC has only purchased the UK division so far. They bought the bank for £1, I would expect this includes the shares, so they effectively bought the whole business for f-all. I think it was a case of HM Government panicking and wanting to avoid a bank run, and HSBC put together a deal which was along the lines of, "we'll cover the liquidity but we're not paying for anything", and they accepted because it was the first/best offer. I'm not sure exactly how much influence the UK government has here over forcing a sale, because the UK arm may have been solvent if the US arm had been bailed out sufficiently.
dave j:
--- Quote from: tom66 on March 14, 2023, 12:23:22 pm ---AFAIK, HSBC has only purchased the UK division so far. They bought the bank for £1, I would expect this includes the shares, so they effectively bought the whole business for f-all. I think it was a case of HM Government panicking and wanting to avoid a bank run, and HSBC put together a deal which was along the lines of, "we'll cover the liquidity but we're not paying for anything", and they accepted because it was the first/best offer. I'm not sure exactly how much influence the UK government has here over forcing a sale, because the UK arm may have been solvent if the US arm had been bailed out sufficiently.
--- End quote ---
Report on the efforts to save SVB UK. There were several companies considered for the takeover and it seems a big part of HSBC being chosen was because it had enough cash reserves to meet ongoing liquidity requirements without having to raise more capital.
coppice:
--- Quote from: dave j on March 14, 2023, 08:15:16 pm ---
--- Quote from: tom66 on March 14, 2023, 12:23:22 pm ---AFAIK, HSBC has only purchased the UK division so far. They bought the bank for £1, I would expect this includes the shares, so they effectively bought the whole business for f-all. I think it was a case of HM Government panicking and wanting to avoid a bank run, and HSBC put together a deal which was along the lines of, "we'll cover the liquidity but we're not paying for anything", and they accepted because it was the first/best offer. I'm not sure exactly how much influence the UK government has here over forcing a sale, because the UK arm may have been solvent if the US arm had been bailed out sufficiently.
--- End quote ---
Report on the efforts to save SVB UK. There were several companies considered for the takeover and it seems a big part of HSBC being chosen was because it had enough cash reserves to meet ongoing liquidity requirements without having to raise more capital.
--- End quote ---
That's worrying. In 2008 people like Barclays were in their bidding to scoop up some US failures cheaply. If they were not head to head with HSBC trying to get SVB UK what does that say about their current state? Simply burned last time, and not interested? Less well positioned?
Rick Law:
--- Quote from: james_s on March 14, 2023, 07:14:04 am ---... ...
The people that clients interact with may be both nice and smart, the people making the decisions in the back may be neither. If they're as large a bank as it sounds like, they probably have (had) thousands of employees.
--- End quote ---
(bold added)
Yeah they are pretty big, 16th largest. I assume 16th only within the USA, but that would still make them a sizable hulk. The impact is not just because of the raw size but their core business. From reports I've seen on the web, a sizable amount of their business is on tech-startups and media. So those two industry (tech and media) is going to be hit worst than other industries.
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