Usually, it's the first challenge that gets banks into trouble. That's what happened to them in 2008 as real estate collapsed. But the now-infamous Silicon Valley Bank ran afoul of the second challenge. SVB was an unusual institution that held considerably more debt securities, such as government bonds, than it did loans. ($120 billion worth of securities but just $74 billion in loans). The bank was also too focused on a single sector-technology companies and the venture capitalists that supported them-and it had vast amounts of demand deposits ($110 billion), which didn't require SVB to pay interest but could be pulled out instantly using an iPhone.
Because of the way bank accounting works, SVB did not have to take a hit to its profits as its bonds fell in value, but depositors learned of the problem and started demanding their money. Federal regulators intervened, guaranteeing all of SVB's deposits-even if they exceeded the $250,000 federal insurance limit, as the vast majority did. The intervention prevented SVB's bank run from becoming contagious.
The management of SVB made a classic mistake by mismatching short-term liabilities (those demand deposits) and long-term assets (such as debt being held to maturity with an average duration of 6.2 years). Most banks don't do such things.
In my view, SVB was a salutary warning to the whole banking sector - as well as to regulators, who were at fault for not recognizing sooner that the bank deserved extra scrutiny because it grew so fast (SVB quintupled in size in five years). The system itself is sound and is now getting even sounder, but there's no doubt that banks are going to tighten their lending requirements, which will further slow the economy.
Bu hikaye Kiplinger's Personal Finance dergisinin June 2023 sayısından alınmıştır.
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Bu hikaye Kiplinger's Personal Finance dergisinin June 2023 sayısından alınmıştır.
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