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Banking Industry health after Silicon Valley Bank collapse: Difference between revisions
Banking Industry health after Silicon Valley Bank collapse (view source)
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On the other hand, the 95th percentile bank uses 52 percent of uninsured debt. For this bank, even if only half of uninsured depositors panic, this leads to a withdrawal of one quarter of total marked to market value of the bank. If any fire sale discounts result from these withdrawals, this can impose substantial losses on the remaining creditors, increasing their incentives to run. | On the other hand, the 95th percentile bank uses 52 percent of uninsured debt. For this bank, even if only half of uninsured depositors panic, this leads to a withdrawal of one quarter of total marked to market value of the bank. If any fire sale discounts result from these withdrawals, this can impose substantial losses on the remaining creditors, increasing their incentives to run. | ||
10 percent of banks have larger unrecognized losses than those at SVB. Nor was SVB the worst capitalized bank, with 10 percent of banks have lower capitalization than SVB. On the other hand, SVB had a disproportional share of uninsured funding: only 1 percent of banks had higher uninsured leverage | 10 percent of banks have larger unrecognized losses than those at SVB. Nor was SVB the worst capitalized bank, with 10 percent of banks have lower capitalization than SVB. On the other hand, SVB had a disproportional share of uninsured funding: only 1 percent of banks had higher uninsured leverage. | ||
While the decline in asset values increased the ratio of uninsured deposits to assets, virtually all banks (barring two) have enough assets to cover their uninsured deposit obligations. In other words, if the FDIC does not step in to protect the deposit insurance or if the liquidation of the assets does not cause large enough fire sales, there may be no reason for uninsured depositors to run. | While the decline in asset values increased the ratio of uninsured deposits to assets, virtually all banks (barring two) have enough assets to cover their uninsured deposit obligations. In other words, if the FDIC does not step in to protect the deposit insurance or if the liquidation of the assets does not cause large enough fire sales, there may be no reason for uninsured depositors to run. | ||
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Special situation. Large capital inflows 2021. Invested in Long Term Maturities classified as Held-to-maturity. Large losses. Bank Run. | Special situation. Large capital inflows 2021. Invested in Long Term Maturities classified as Held-to-maturity. Large losses. Bank Run. | ||
Special Clients - VCs, Money outflows. | * Special Clients - VCs, Money outflows. | ||
SVB had a huge share of uninsured deposits, at 93%. <ref>https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/svb-signature-racked-up-some-high-rates-of-uninsured-deposits-74747639#:~:text=Silicon%20Valley%20Bank%20ranked%20second,as%20of%20year%2Dend%202022.</ref> | * SVB had a huge share of uninsured deposits, at 93%. <ref>https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/svb-signature-racked-up-some-high-rates-of-uninsured-deposits-74747639#:~:text=Silicon%20Valley%20Bank%20ranked%20second,as%20of%20year%2Dend%202022.</ref> | ||
* SVB did not had heghes to offset for the interest risks it took. <ref>https://twitter.com/FedGuy12/status/1635263272705470467</ref> | |||
== First Republic Bank == | |||
== Possible Affected Banks == | == Possible Affected Banks == | ||