[churchill]

I wonder why no one has said it yet but Mercury will come out the biggest winner from this mess. I can't estimate how the traffic from SVB > Mercury has been but I saw a post by Arc.tech saying they'd received hundreds of millions in deposits between 8 - 10 March.

Given Mercury was a more popular contender, I'm going to bet they had an inflow of basically double-digit billions.

[partiallypro]

But mass inflows of deposits are exactly how SVB got into the situation it's in now. You have to pay interest on the deposits. I'd much rather go to a truly "too big to fail" bank that can easily cover the deposit interest with a diverse line of business.

[jjeaff]

I don't think Mercury pays any interest on their regular checking or savings accounts.

They offer treasury accounts that you can move money to and buy securities if you want yield.

So I don't think they have too much risk as far as interest on deposits. But what worries me, as a small business owner that has been using and loving Mercury for a few years now is that they offer free domestic and international wire transfers and I worry that they might start charging for that. It is the first bank I have had that did free international wires and I actually use that frequently. My last bank charged $85 and I literally had to fax a signed form to them to get it done.

The thing I don't know is if there is a per transaction fee that the banks pay. I assumed that there is and that Mercury was just eating the cost as a marketing expense.

[TrainedMonkey]

Interest rates are already high, so whoever get the inflows can buy 3 months treasure notes to get the cake and eat it too.

There is still risk of interest rates rising significantly higher, but with 3 months treasure notes the downside is limited.

edit: typoed

[baq]

The thing with interest rates is in high inflation you never know what high really is since high inflation itself is highly volatile.

I.e. don’t be SVB. Hire a risk officer.

[slv77]

There is no need as they can just park the excess reserves with the Fed and earn a risk free rate with no duration risk.

[toast0]

> You have to pay interest on the deposits.

Eh, how much does BofA or Chase pay on deposits? Interest rates have gone up, so they might hit 0.05% now?

[jjeaff]

Do they pay anything at all for business accounts? It wasn't even legal to provide interest checking and savings to business accounts for a few years after dodd-frank. I haven't seen a lot of bank jump to offer it.

[JumpCrisscross]

> mass inflows of deposits are exactly how SVB got into the situation it's in now

It gave them the opportunity to make the mistakes they made. It didn't cause them. If you have more deposits than you can responsibly invest, you cut your rates until you can.

[baq]

Banks are supposed to know how to deal with this problem… a couple didn’t.

[tempsy]

Why would anyone go from midsized public bank to opaque neobank if they're now spooked about bank solvency issues?

The logical move is to go bigger eg JPM.

[snuxoll]

Mercury just announced a new cash management / CDARS account to provide up to $3mm of FDIC coverage through 12 partner banks, with plans for potentially more. I would hope the lesson from SVB's collapse is don't put your eggs all in one basket, not put them in the biggest basket you can find.

(That said, said service to split your eggs up doesn't need to be Mercury - they're just the VC-backed startup darling here. There's plenty of other banks that offer these services.).

[kentonv]

Because (apparently; I'm just reading from their web site) they deposit your funds into 12 separate accounts at 12 separate FDIC banks so you are insured up to $3M and a single-bank failure can at worst take 1/12 of your deposits.

Seems like services like this should be more popular.

[ghc]

It's called an Insured Cash Sweep and most banks offer it: https://en.wikipedia.org/wiki/Insured_Cash_Sweep

The problem here is one of fiscal immaturity at startups. SVB offered ICS accounts but from what I'm seeing few startups put their money into them. My bet is that startups mature enough to have a proper CFO weren't as impacted by this mess.

[acomar]

from what I've read, they're a standard practice in traditional finance/risk management circles? it's what makes the whole situation with SVB so much more mind-bending. this isn't some new technology that's never existed before. why were VCs insisting that money had to be held at SVB, knowing that by doing so, they'd put their funded companies above FDIC insurance thresholds?

was it incompetence or greed?

[ChickenNugger]

Am I the only one wondering why they're allowed to circumvent the $250K cap like this?

Presumably there's a cap for a reason, and presumably it's to protect ordinary Americans who rarely have $250K in assets, and not rich people who can literally afford to lose that much and still be rich.

[kentonv]

No, this is exactly what's supposed to happen. The FDIC wants large depositors to spread their deposits over many banks as this reduces overall risk. The limit is not about protecting "ordinary Americans" over "rich people".

[baq]

The cap is designed to be circumvented in this way. You don’t game the system, if you think so, the system games you.

[altdataseller]

Based on the description of what they do, how is that circumventing? You can do the same thing they're doing by depositing into multiple banks too. The only difference is that Mercury is the custodian, and doing it for you

[piperswe]

It's not circumventing the cap. If one bank fails, there's only a $250k insured loss, which is exactly the FDIC's goal with the cap

[elif]

does that mean that every time you purchase a coffee, 13 transactions take place to keep the distribution balanced?

otherwise 1/12th of your deposits would be the /best case scenario/ not the worst case.. it comes down to the details of how they balance the balances.

[mixdup]

if all of the accounts are below the $250k, then you actually have zero at risk, not even 1/12th

As long as your accounts are under the limits, there's no need to re-balance on outflow, just ensure you remain under the insurance limits at inflow

[swsieber]

I'd probably move about 250k an opaque neobank if I'm spooked about to solvency issues.

[jjeaff]

Mercury isn't really a bank. They are a nice, new UI that uses real banks behind the scenes. The main bank they use is Evolve bank and trust and has been around since 1987. But as of last year, they just had around $1B in assets under management.

[kyawzazaw]

Doesn't this lead to concentration of asssets into bigger banks?