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svb collapse reasons by techsigma.pdf
- 1. bRO, what is this SVB everyone speaking? bRO, it's one of largest bank and.... lets discuss SVB .... and it's collapsing AND I NEED TO KNOW WHY !!! by tectikal
- 2. Silicon Valley Bank - one of the 20 largest banks in America going down with the stock prices down by 80% In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. As deposits grew, their loan book couldn't grow in the same manner
- 3. As a result, they purchased a large amount (over $80bn!) in mortgage- backed securities (MBS) with these deposits for their hold-to-maturity (HTM) portfolio. Large portion of the MBS were of 10+ years in duration, with a weighted average yield of 1.56%.
- 4. SVB recently Announced that they sold the $21 Billion worth of investments for a loss of $1.8bn loss and also wanted to raise $2.25bn in equity and debt. This came in as a surprise to the investors as they thought there was enough liquidity in the bank and they didn't have to sell any investments.
- 5. VCs and Tech startups are in a panic and have further advised their portfolio companies to withdraw money from SVB. If withdrawal continues, SVB may face severe liquidity issues because a large part of its money is blocked into long- term bonds and held for maturity.
- 6. VCs and Tech startups are in a panic and have further advised their portfolio companies to withdraw money from SVB. If withdrawal continues, SVB may face severe liquidity issues because a large part of its money is blocked into long- term bonds and held for maturity.
- 7. This is a saga of how an asset- liability mismatch can turn into a liquidity event and further into a solvency event.