Outside Topic SVB - Printable Version

Outside Topic SVB - Printable Version

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SVB - OutsiderFan - 03-11-2023

Without getting into a discussion of why SVB failed, was taken over by FDIC, or the implications...

Does this mean all SVB business customers must shut their accounts and find another bank? I have a business with an account there, and it's not a very convenient time to change banks, but I obviously will if it is necessary. I've heard not a peep from the bank and it will not be open until Monday to answer questions, so thought maybe some Cardboard readers might have insights.

In 2008, I had a Washington Mutual account that was absorbed by Chase. It was a seamless process that didn't require me to do anything. Might another bank buy SVB and eliminate need to change banks? It looks like a buyer for SVB couldn't be found before FDIC stepped in as a receiver because the pace of withdrawals made it difficult to put an accurate value on the bank for any buyer to assess an accurate price.

I'm wondering if after the initial panic withdrawals wave subsided, things will stabilize a bit. SVB gets all its acclaim as serving VC funded tech companies, but it also is big in the wine industry. So if wine businesses and others that aren't reliant on VC funding don't panic, maybe a buyer can be found to buy a much smaller operation and businesses like mine won't have to change banks.

Anyone have any thoughts to share on this? This may not be sports-related, but it certainly has to be relevant to Stanford in some way.

RE: SVB - JohnR34231 - 03-11-2023

(03-11-2023, 05:53 AM)OutsiderFan Wrote: Without getting into a discussion of why SVB failed, was taken over by FDIC, or the implications...

Does this mean all SVB business customers must shut their accounts and find another bank? I have a business with an account there, and it's not a very convenient time to change banks, but I obviously will if it is necessary. I've heard not a peep from the bank and it will not be open until Monday to answer questions, so thought maybe some Cardboard readers might have insights.

In 2008, I had a Washington Mutual account that was absorbed by Chase. It was a seamless process that didn't require me to do anything. Might another bank buy SVB and eliminate need to change banks? It looks like a buyer for SVB couldn't be found before FDIC stepped in as a receiver because the pace of withdrawals made it difficult to put an accurate value on the bank for any buyer to assess an accurate price.

I'm wondering if after the initial panic withdrawals wave subsided, things will stabilize a bit. SVB gets all its acclaim as serving VC funded tech companies, but it also is big in the wine industry. So if wine businesses and others that aren't reliant on VC funding don't panic, maybe a buyer can be found to buy a much smaller operation and businesses like mine won't have to change banks.

Anyone have any thoughts to share on this? This may not be sports-related, but it certainly has to be relevant to Stanford in some way.

Well, here's one person's opinion on what may happen.
https://seekingalpha.com/article/4586729-svb-financial-group-what-happens-next

RE: SVB - martyup - 03-11-2023

I'm sure that George will sort it out.

https://www.youtube.com/watch?v=1VIk4FIshp0

RE: SVB - cardcrimson - 03-11-2023

Employees were given a 45 day notice this morning. Don't know the details yet. . . .

RE: SVB - JohnR34231 - 03-11-2023

(03-11-2023, 08:56 AM)martyup Wrote: I'm sure that George will sort it out.

https://www.youtube.com/watch?v=1VIk4FIshp0

Yeah, where was Jimmy Stewart when SVB needed him.

RE: SVB - 82lsju - 03-11-2023

the most popular search for start-up CFOs the last couple of days

"what do I do if my payroll doesn't clear"

and many firms paydays were either yesterday or will be next Wednesday.....

more details on what happened

Quote:But for customers with deposits totaling more than $250,000, the news was grim. Customers with accounts that surpassed that amount — the maximum covered by F.D.I.C. insurance — would be given certificates for their uninsured funds, meaning they would be among the first in line to be paid back — though potentially only partially — with funds recovered while the F.D.I.C. holds Silicon Valley Bank in receivership.

Perhaps the most immediate concern for investors is the possibility that other banks could face their own troubles.

Shares of both First Republic and Signature Bank in New York were down more than 20 percent in trading on Friday. Larger banks were more insulated from the fallout. After a slump on Thursday, shares of JPMorgan, Wells Fargo and Citigroup all nudged higher on Friday.

https://www.nytimes.com/2023/03/10/business/silicon-valley-bank-stock.html

Quote:A recent 10-K filing showed more than 90 percent of its deposits were uninsured, and the FDIC says today that “At the time of closing, the amount of deposits in excess of the insurance limits was undetermined.” Some companies who tried to pull money out on Thursday said they were having trouble making transfers, and there is concern over how this could affect some tech and biotech startups who still had their money deposited with the bank.

https://www.theverge.com/2023/3/10/23634012/fdic-shut-down-silicon-valley-bank-startup-venture-capital-cash

Quote:All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.

Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds.

As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.

Customers with accounts in excess of $250,000 should contact the FDIC toll–free at 1-866-799-0959.

The FDIC as receiver will retain all the assets from Silicon Valley Bank for later disposition. Loan customers should continue to make their payments as usual.

https://www.fdic.gov/news/press-releases/2023/pr23016.html

RE: SVB - martyup - 03-11-2023

For those who don't read news and stumble upon SVB's website, it appears all is well.

https://www.svb.com/

RE: SVB - Mick - 03-11-2023

(03-11-2023, 09:13 AM)JohnR34231 Wrote:
(03-11-2023, 08:56 AM)martyup Wrote: I'm sure that George will sort it out.

https://www.youtube.com/watch?v=1VIk4FIshp0

Yeah, where was Jimmy Stewart when SVB needed him.

SVB has this guy, instead...

Looks a lot like this guy, without the warmth...
[Image: Lionel_Barrymore_as_Mr._Potter.jpg]

In all seriousness, if you have $250k or less, you're insured. As for someone buying the bank, we should know within 48 hours. JP Morgan's acquisition of WaMu after their bankruptcy didn't go especially well, and that was a Main Street bank -- SVB is anything but. It's as close to a retail institutional bank as exists. There's some call (from at least one prominent V/C billionaire) for a bailout, given its unique place in the tech ecosystem, but I don't know if there will be much political support for a tech-related bailout. Current SVB management will be deservedly screwed -- i'd be very much interested in seeing the pattern of stock sales from existing management over the last 120 days. Unfortunately, a sizeable proportion of SVB employees owned SVB stock through their IRAs. And yes, this does smell a bit like Enron from that perspective. Investors will have to take whatever share price is agreed to by whatever misguided, deluded bank ends up purchasing Silicon Valley Bank.

Small account holders will be made whole. Current management, bondholders, shareholders, and bank investors will lose big. As to whether customers who have more than $250k in deposits at the bank are made whole, as 82lsju noted above -- we'll see.

RE: SVB - 82lsju - 03-11-2023

(03-11-2023, 09:18 AM)Mick Wrote: i'd be very much interested in seeing the pattern of stock sales from existing management over the last 120 days.

Quote:Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.

The sale of 12,451 shares on Feb. 27 was the first time in more than a year that Becker had sold shares in parent company SVB Financial Group, according to regulatory filings. He filed the plan that allowed him to sell the shares on Jan. 26.
...
“While Becker may not have anticipated the bank run on Jan. 26 when he adopted the plan, the capital raise is material,” said Dan Taylor, a professor at the University of Pennsylvania’s Wharton School who studies corporate trading disclosures. “If they were in discussion for a capital raise at the time the plan was adopted, that is highly problematic.”

https://www.mercurynews.com/2023/03/10/svb-chief-sold-3-6-million-in-stock-days-before-banks-failure/

RE: SVB - BostonCard - 03-11-2023

The FDIC will try to find a buyer for the bank, who will be buying the customers, who, I suspect, will be very valuable.

BC

RE: SVB - TrumpCard - 03-11-2023

Reports say $209 billion in assets to cover $175 billion in deposits. Some assets will have to be sold at a significant discount but a 16% cushion is pretty good. I suspect depositors will be made whole. Equity investors should not recover a dime, though it’s tough to predict what’ll actually happen in this sort of situation. Bond holders will likely get something, but still suffer big losses. Most of the bank’s management should be out of jobs. Allowing a top-20 bank to fail in a decent economy required very irresponsible decision making.

RE: SVB - chrisk - 03-11-2023

Some long-dated Tresuries would be valued at more than a 16% discount. The value of the loans will depend greatly on the severity of the ongoing tech downturn. There probably has been further deterioration in the loan portfolio since the last reported asset number.

SVB was regulated by the CA Department of Financial Protection and Innovation. Enough said.

CEO Becker was immediately removed as a director of the SF Fed. He represented large banks in the district.

RE: SVB - OutsiderFan - 03-11-2023

(03-11-2023, 01:51 PM)chrisk Wrote: SVB was regulated by the CA Department of Financial Protection and Innovation. Enough said.

Oxymoron?

RE: SVB - Leftcoast - 03-11-2023

I spent Friday helping our finance team unwind as much as possible from SVB - opening up new accounts, steering disbursements that way (AMZN, others), getting our payment term customers new wire instructions, and so on. Others were contacting venture investors to secure financing for emergency liquidity. Not a fun day.

There’s a SVB Private location across the street though and I’m sure their day was worse.

RE: SVB - BostonCard - 03-11-2023

(03-11-2023, 07:59 PM)Leftcoast Wrote: I spent Friday helping our finance team unwind as much as possible from SVB - opening up new accounts, steering disbursements that way (AMZN, others), getting our payment term customers new wire instructions, and so on. Others were contacting venture investors to secure financing for emergency liquidity. Not a fun day.

There’s a SVB Private location across the street though and I’m sure their day was worse.

Sorry you had to go through that. I hope you and your team get through this.

BC

Fwiw, looks like the FDIC has sold enough of SVB’s assets over the week end that uninsured depositors will be able to start getting their money back on Monday.

[tweet]https://twitter.com/mattyglesias/status/1634745227813478407?s=61&t=uOULmTXhVLkcXRmnxXcClQ[/tweet]

My understanding is that this is a start, and that SVB’s assets should be able to cover all or almost all of the uninsured depositors, and that a buyer, if found, should be able to make even the uninsured depositors whole.

BC

RE: SVB - BostonCard - 03-12-2023

If you’ve always wanted a bank, here’s your chance:

[tweet]https://twitter.com/mattyglesias/status/1634947991672086530?s=46&t=tTMJoVUyV69NbVTC5DVNgw[/tweet]

BC

RE: SVB - cardcrimson - 03-12-2023

I don't understand why the Feds are racing to sell assets and having an extremely quick bid process to sell the bank. Fire sales rarely return the most for the stakeholders. And those with funds there, certainly didn't need them immediately. Maybe someone can explain the rush.

RE: SVB - CompSci87 - 03-12-2023

Could be worried some assets will lose value, especially if they aren't disentangled from the bank quickly...? Just a guess.

RE: SVB - TrumpCard - 03-12-2023

(03-12-2023, 11:16 AM)cardcrimson Wrote: I don't understand why the Feds are racing to sell assets and having an extremely quick bid process to sell the bank. Fire sales rarely return the most for the stakeholders. And those with funds there, certainly didn't need them immediately. Maybe someone can explain the rush.

When the Feds take over a bank, their priority is to protect the banking system, not to protect the particular bank they are taking over. I'm guessing that the Feds want to ensure that: (1) depositors get their money out quickly so that employees of SVB depositors get their paychecks; and (2) there are enough funds on hand for SVB to close pending transactions. Holders of equity and debt in SVB will recover less of their investment, but I'm guessing that investor losses don't pose much risk of contagion. If mid-sized bank stock prices take a hit, that won't pose a major liquidity problem for those banks. If customers or counterparties feel insecure about doing business with mid-sized banks, then we could see more bank runs, and more mid-sized banks going under.

Edit:

Here's an interesting take from Bill Akerman. He may well have a financial stake in the Feds taking the action he espouses, but nevertheless, his position does have some merit. Note he says that depositors should recover 98% of their uninsured deposits without any action from the Feds, so my earlier take that depositors would recover 100% may well be wrong. Anyway, back of the envelope, the position he's espousing might cost the Treasury about $2 billion:
https://twitter.com/BillAckman/status/1634564398919368704?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1634564398919368704%7Ctwgr%5E8685d47ec9505c0e490081a4ee3f52f78e156556%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.foxbusiness.com%2Fmarkets%2Fbillionaire-bill-ackman-svb-collapse-government-has-48-hours-fix-irreversible-mistake

And, here are some quotes from Janet Yellen, who says the Feds are not considering an investor bailout, but they are considering a bailout for uninsured depositors. I note, however, that a bailout for uninsured deposits might end up making a sale of the bank possible (rather than a liquidation of assets). If that uninsured depositor bailout is the decisive factor in helping sell SVB to a larger bank, then the unintended result might be a better financial outcome for holders of equity and/or debt.
https://www.cbsnews.com/news/janet-yellen-silicon-valley-bank-bailout-face-the-nation-interview-today-2023-03-12/

RE: SVB - BostonCard - 03-12-2023

Equity holders of SVB have been, and should be, wiped out. Debt holders will take a severe haircut, if not be wiped out. Insured depositors will be made whole, and should be able to access their money tomorrow.

The question is what happens to the uninsured depositors. By definition, “uninsured” means you take some risk. Historically, even uninsured depositors have recovered all their money during a bank failure, but that process isn’t necessarily immediate. As I’ve posted, come Monday, they will have access to a third to half of their uninsured deposits, which hopefully will be enough to make payroll and deal with immediate payments. Those who don’t should be able to access a line of credit somewhere else to tide them over, and for startups, their VCs can and should be able to help; after all, VCs are invested, literally, in ensuring that their portfolio companies don’t fail due to something like this.

I think there will be bids for SVB. Their customers are very valuable, and who wouldn’t want to be the knight in shining armor that “saves” Silicon Valley. That being said, if they don’t, then the FDIC will slowly unwind SVB’s positions, and the uninsured depositors will get most, and hopefully all, of their money back, though it may be tied up in the wind down for a while.

Irony aside, I think there is an active debate about whether taxpayer money should be used to make uninsured depositors whole, in the case where there’s no buyer and SVB’s assets can’t cover all the depositors. I have mixed feelings about it.

BC