[resters]

SVB does a lot of venture debt. When venture debt is not repaid, SVB ends up owning the company, and can recover its exposure only if there is a buyer for the company or assets.

In early stage land where valuations are the result of a fairly small consensus, it is plausible that SVB would have over-extended.

[JumpCrisscross]

> SVB does a lot of venture debt

These losses aren’t related to SVB’s debt portfolio. It’s due to their deposits being flighty.

SVB banks start-ups. Start-ups are spending cash faster than they’re getting it from VCs or customers. That leaves SVB with fewer deposits with which to fund their assets, so they must fire sell assets, which isn’t fun to do.

[resters]

Doesn't SVB require a startup to keep a certain amount of cash reserves deposited in order to be eligible for things like merchant accounts and other "free" financial services?

[willis936]

Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in?

[TuringNYC]

>> Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in?

As they say themselves, Category IV organizations, like SVBFG, are subject to supervisory stress tests conducted by the Fed "every other year."

So you can get Stress Test results, but they will be stale. See Page 13 here: https://www.svb.com/globalassets/library/uploadedfiles/conte...

Not sure if there are other ways to get tier ratios, would be curious if anyone else could chime in?

[toomuchtodo]

Too much latency with official reporting to suss out an insured institution going over the cliff, indicator would be SVB reps meeting with FDIC examiners around receivership and liquidation. Doors close on Friday, receiving bank opens all the branches back up as them on Monday.

https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t...

[toomuchtodo]

It is done.

https://news.ycombinator.com/item?id=35096877

[hef19898]

Stupid question, but should the investment arm of a bank be separated from the banking arm?

[dmoy]

They used to be, after glass stegall in the 1930s.

this was a problem we learned during the 1920s

That has since been...... relaxed gradually, and almost completely done away with under Clinton in the 1990s. And then <10 years later we got the 2007/2008 crisis. But, the original separation of investment and banking didn't get re-instated during the dodd frank stuff that came after the last crisis.

[nradov]

Maybe, but that's not relevant here. All banks invest their deposits in similar types of debt. SVB just made some bad decisions in terms of timing and liquidity, and now they have to recapitalize. If they can pull it off successfully then the bank will be fine but shareholders will get diluted.