The bank failed to follow an important piece of advice for investors: spreading risk. And that turned out to be a huge miscalculation, especially when interest rates went up. New government bond yields also rose. Thus, previously issued lower interest rate bonds will not be lost on the paving stones.
Anyone who suddenly has to sell these because savers are asking for their money is left with a baked pear. It turns out that this is exactly what happened in SVB from the letter submitted by the Bank to the US Securities Exchange Commission.
The sale of $21 billion worth of bonds resulted in a loss of $1.8 billion. This was the starting signal for other SVB clients to also claim their savings, a real bank buyout.
4. What exactly is a bank run?
When savers withdraw their money en masse from their bank accounts because they fear it is no longer safe. Often this is a self-fulfilling prophecy: the bank will have problems if a lot of money is suddenly needed.
No bank has so much cash that it can pay all of its depositors their money if they ask. Absolutely not, SVB does, and so the bank had to file for bankruptcy last Friday.
Bad news for all savers who fail to withdraw their savings. Fortunately for them, the US government stepped in to help. He promised to reimburse all savers at the end of last week. Tax money is not used for this, and money is collected from other banks.
Savers from the British branch of the SVB have found shelter with banking giant HSBC.
5. What do we observe in the Netherlands?
Not a “normal” consumer (yet). Because of European rules, Dutch banks must maintain higher margins of safety than banks in the United States. These capital requirements have tightened considerably since the collapse of Lehman Brother and the subsequent financial crisis in 2008.
Lyman’s demise is now often cited. But this is misplaced, writes Lukas Daalder In Financieele Dagblad. He is the Head of Investment Strategy in the Netherlands at Blackrock, one of the world’s largest asset management firms.
Daalder argues that the buffers for banks are now much higher. In addition, according to him, SVB cannot be compared with other banks, due to the focus on a specific group of clients and poor investment strategy by owning such a large volume of bonds.
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