[fredoralive]

The public messaging on Friday from SVB UK was that they were entirely ring-fenced, all is well etc. But behind the scenes they were going to the Bank of England asking for emergency funding. So by Saturday the wheels were turning on the insolvency processes. I guess the US media was focussed on the US side of things, in the UK there has been a lot of noise about lots of UK startups having money tied up in SVB UK and how things need to be done to sort the situation.

[rvnx]

HSBC made a deal too good to be true, that it sounds like it may be hiding something.

Nobody can buy a profitable, stable, multi-billion company for 1 GBP, without a good cause.

Yes, SVB UK is legally fenced, but in terms of management and daily practices, why wouldn't they have the same issues as their parent ?

[mytailorisrich]

If HSBC bought it for £1 (which is a minimal amount in order to have a binding contract) it does not mean that the deal is too good to be true. It means that the company actually has a negative net value, i.e. more liabilities than assets, and of course HSBC will take those liabilities on.

It's a bit like if you want to buy a house that has a mortgage and the deal is that to buy the house you have to take the mortgage on as well. How much cash would you be willing to pay for that? Potentially 0 (i.e. taking the mortgage on is enough for you).

[shoo_pl]

It's not a multi-billion company, it a bank that has billions of loans and deposits (assets and liabilities). Yes, its a profitable bank but on order of magitude lower scale:

> It also logged a pretax profit of £88 million ($106.5 million) in its last fiscal year ended December.

[Teandw]

You can't have a profitable bank that's insolvent. That doesn't make sense.

The company has gone insolvent because it's no longer profitable.

[ClumsyPilot]

banks are not 'normal' companies.

Their Liabilities and assets outmatch their 'profit' by 100x.

They could be making a handy profit yesterday and be bancrupt today because the market has moved. Normal companies can't go bancrupt in one day

[Teandw]

I'm not sure you understand what's happening here or the basics of business and liquidation.

"Normal companies can't go bankrupt in one day" - They didn't go bankrupt. They went into liquidation. Massively different thing. You can have a company with billions of quid saved up in the bank that goes into liquidation.

Liquidation is quite common and happens daily in the UK to 'normal' companies. Companies that were profitable last week and no longer can operate as they're not profitable enough to pay their debts/what they owe.

I think your issue here is you don't understand what liquidation is/means and basic principles of business profits. The most important part is that while a company may be profitable at the 'end of year' -- They have to first get to the end of the year.

[mattmanser]

To me it sounds like you don't understand them either?

What you seem to be talking about about is cashflow insolvency. You can have a wildly profitable contract that pays in 120 days, but have no cash on hand to pay debtors. The work you are doing is profitable, you just can't afford to pay your debtors right now.

Profit != cashflow, that's why it's called cashflow insolvency instead of profit insolvency. You seem to be mixing up profit and cashflow.

But you're also talking about the wrong thing. These banks are not in cashflow insolvency. As far as I can see, these banks are going through what is called balance sheet insolvency. Their assets are worth less than their liabilities.

However, the assets are weird as the $100 bond they have is presently worth $78 even though in 10 years time it will be worth $100 again.This is because the interest the bonds pay is so low, no-one wants to buy it right now.

So their balance sheet doesn't add up, and as people started taking money out, they couldn't cover their liabilities. It LOOKED like their balance sheet was fine as they were valuing them at $100, but then they were forced to sell them and suddenly they have a big hole in their balance sheet.

So they're insolvent not because they've got a cashflow problem, but because their balance sheet doesn't balance. And the regulators stepped in to stop some creditors getting all their money out before that bank essentially went bust, leaving other creditors with nothing.

And now the regulators seem to be saying "we're going to guarantee that $100 bond is worth $100 even if you can only sell it for $78". By loaning people money up to $100 against it if they have one.

And they are claiming it won't cost the tax payer anything. But they're making 0% loans to banks when high inflation is happening, so the money they get back is going to be worth less than if they spent it on roads or healthcare, or whatever.

Maybe I'm wrong, and happy to be corrected, but it does seem what you're saying is wrong.

[schrodinger]

Off topic, but did the slang quid come from liquid as in assets?