[throw_pm23]

Couldn't someone with a lot of cash buy them, pay back the depositors without having to sell assets, then hold the assets until maturity, and then make a profit (presumably having bought them at a discount)? As far as I understand, the nominal value of assets still exceeds the obligations?

[PeterisP]

For the big SVB assets, the outcome of "holding the assets until maturity" is the price at which you can sell these assets; someone who intends to do that will buy these assets at a rate where they roughly break even - they're pretty much a commodity, so the auction price is close to the value.

But buying long-term assets at some small discount (e.g. 10%) and holding them to maturity would not make a profit - the nominal value of these assets + the interest on the (low!) fixed interest rate is far lower than the interest rate you can get elsewhere; if the difference between the interest rate that SVB had fixed and the current market rate is ~2% (which seems roughly in the ballbark) then a crude estimate is that the discount has to be 20%-ish if there's 10 years remaining until maturity and 40%-ish if there's 20 years remaining... so that's appropriately reflected in the (lowered) price those assets can fetch. The nominal value is irrelevant as future money is worth much less than current money.

[gruez]

>As far as I understand, the nominal value of assets still exceeds the obligations?

AFAIK that number was based on the book value (ie. how much it cost for the bank to buy the bonds/MBS), not the current fair market value. Other sources say that SVB is in the hole when using current fair market value for their assets.

>So big was this drawdown that on a marked-to-market basis, Silicon Valley Bank was technically insolvent at the end of September. Its $15.9 billion of HTM mark-to-market losses completely subsumed the $11.8 billion of tangible common equity that supported the bank’s balance sheet.

https://www.netinterest.co/p/the-demise-of-silicon-valley-ba...