>Bank of London weighs rescue bid for UK arm of Silicon Valley Bank
>The Bank of London is exploring the possibility of assembling an offer for SVB UK as start-up founders warn Jeremy Hunt that its collapse will "cripple" the British tech sector, Sky News learns. News of its interest comes hours after the Bank of England said it planned to use a bank insolvency procedure to take control of the British operation, which counts thousands of UK start-ups among its clients.
>The implosion of SVB's US-listed parent company, which has been taken into government control, represents one of the biggest banking collapses since the financial crisis of 2008. UK depositors stand to receive up to £85,000 as part of the resolution of the British arm of SVB, sparking fears about the fate of substantial amounts of funding in the start-up community.
Biggest banking collapse since 2008 and it's taken a chunk of the crypto market with it with projects like StableCoin losing their peg to the US dollar having had billions tied in. Reckon we're due another big one?
>>9613 >Sky News has learnt that The Bank of London (TBOL), which recently raised funds at a valuation of over $1bn, is considering making an offer for SVB UK.
Yeah TBOL is a new firm, a clearing bank. That name is going to confuse people with the Bank of England and give it false credibility.
Apparently a ton of US banks are seeing their values drop.
My impression is we're overdue something big, the central banks have been trying their best to delay the inevitable for the last couple of years now,, but the life support can only go on for so long before the gravity is too strong. With everything that's going on in the world right now it's amazing nothing has happened sooner- Or perhaps, it's maybe granted a stay of execution because it means there are "external factors" to shift the blame onto.
But in general I think it's more a matter of when, not if, a big enough domino will fall. Reality will catch up sooner or later.
>>9615 >Apparently a ton of US banks are seeing their values drop.
It's not just US banks that have taken a big hit. I hope otherlad from a couple months back didn't put all his eggs in the bank because a lot of the growth over the last few months has been driven by the view they're safe bets. Looking at my own results yesterday, banks globally have taken the same kind of hits that the smallcaps have felt.
For me the interesting albeit obvious thing is noticing that the systematic shocks at the moment are all coming from the bond markets. I was expecting the story to continue along the JGB saga with the Bank of Japan finally losing control but it seems like we'll have several waves coming up.
Depends how secure your job is. Much like in 2008 there will be those badly affected, those less badly affected, but pretty much everyone will feel it. Mind you, the ordinary person is already feeling it.
In America unemployment is already rising. There will be a big boom in joblessness and a recession, the Fed is desperately hiking its rates in the hopes it can weather the unemployment but avoid recession. I don't think it will work, at this point it's just inevitable, and trying to put it off is only keeping all this inflation going.
In this country I don't think unemployment will be such a massive problem, because our labour market already has the opposite problem. But it can't be said we have a lot of resilience built in to the economy right now. If we're lucky it will at least just finish off the abysmal present government.
>>9619 The British economy grew by 0.3% according to the most recent numbers, but I don't really know what different types of numbers there are. Doesn't this mean we can't officially have a recession until at least autumn?
>Doesn't this mean we can't officially have a recession until at least autumn?
Officially a recession is defined as two successive quarters of negative growth. The 0.3% growth figure is monthly growth in January, so we could still end up with negative growth in the first quarter. Quarter 4 of last year had zero growth. Unless something weird happens, it's basically 50/50 as to whether we'll narrowly avoid a recession or dip into a mild recession in Q2.
My prediction is that next week will be very tough for the markets and bailouts will have to happen. With the question of how bad the spillover will be that we saw the start of on Friday to other banks. The impact will trickle down to poor people once Hunt gives the Spring Statement on the 15th that was already looking to be tight for spending to then splurge next year for election reasons and now even more money will need to be found.
We don't know that it will be, but there is always the risk of market contagion. The 2008 crisis was triggered by Credit Default Swaps, but there was a domino effect of very dodgy things collapsing, leading to slightly dodgy things collapsing, through to barely dodgy things collapsing. Everyone owes everyone else money, so a collapsed bank weakens the entire financial system and can be the trigger for a much bigger chain of events.
The SVB collapse is causing concern because it wasn't triggered by any kind of dodgy financial shenanigans, but by inflation. SVB were over-exposed to long-term government bonds, which became massively devalued as the global economy suddenly shifted from more than a decade of low inflation and low interest rates. SVB didn't do anything obviously stupid, they just hadn't anticipated such incredibly rapid increases in interest rates and had placed too much confidence in what is conventionally regarded as the safest possible asset class.
This could well be a complete nothingburger, but we need to be at least slightly alert to the possibility that there could be some kind of rot in the financial system that we're currently unaware of. Banks do fail, but the failure of SVB was unexpected and sudden, which isn't a good sign. The regulatory system is supposed to prevent that, or at least give us advanced warning of it.
>>9613 TL;DR: What's happening is not systemic, but might become systemic if silly buggers read some coincidentally-timed but unrelated stories as some kind of sky falling in event.
SVB's failure isn't really anything to do with the wider banking system. It's almost entirely down to a combination of the risk profile of their customers and bad decision making at the bank itself. Part of their offering was very favourable terms for venture-backed companies. For instance, if you closed a funding round, and banked with them, they'd match it 30% in the form of an interest-only loan. In order to hedge this, their portfolio included US Treasury bonds (which are literally safer than houses) and a bunch of mortgage-backed securities. MBS are not particularly liquid, but T-bonds are very liquid, so they figured they wouldn't have a problem. The Federal Reserve has increased interest rates, which in turn has reduced the price of T-bonds, which meant that if you're forced to sell you'll be taking a loss. SVB ended up having to do this after they got caught short of cash. (If you're wondering what else they were planning to do with the bonds, the answer is "hold them to term to claim the full face value".) They had been planning on being able to use their MBS portfolio to cover some of this, but the values of those had also shrunk and there wasn't liquidity in the market for them to get out. As a public company, SVB has to include things like this on its financial statements, and as it turns out sometimes people actually read those. That kicked off a run, and many investors, including Peter Thiel, started advising their companies to get out of the bank if they could, leading to a run which SVB had no chance of escaping, since with the losses they'd already taken they were almost certainly not going to realise enough cash to satisfy withdrawals if they had to fire-sale everything.
SVB was nominally a top 20 bank in the US, but that's partly because of consolidation reducing the number of players (as a result of which 20 is actually quite a large number) and partly due to the chronic inflation of tech company valuations (and therefore the size of equity rounds).
Some people may get worried because at the same time this was happening:
- Silvergate Capital, a crypto-friendly bank, failed in the wash from the ongoing crypto crash
- Signature Bank of New York, another crypto-friendly bank, is having trouble both to do with crypto itself and allegations of fraud and corruption
- Wells Fargo appears to be suffering an incident not dissimilar to the one over here that took down a major high street bank for several days
Separately, a number of UK companies are in a similar position due to banking with SVB's UK arm, but since the UK's banking sector actually does vaguely have regulation and vaguely cares about competition, most startups are perfectly happy (FSVO) banking with conventional banks.
This. It's a large bank failure mainly because of the size of SVB's balance sheet. But their main business wasn't to provide personal ISAs or current accounts or even garden-variety business loans, but to finance tech companies. As the tech environment deteriorated since early last year and bonds crashed and people wanted their money back, they were pinched from all sides.
I don't think there's a risk of contagion in the wider banking sector. If you look at how badly the tech sector in the U.S. has been doing following the Fed's interest rate hikes, something had to give. A tech oriented bank going tits up is in some way just the other shoe that has now dropped.
It's not a problem I've ever had - where do companies with massive cash piles put it? My lot have about $1B cash on hand. Seems like a pain in the arse to have to look after that, but I'm sure we have people doing so.
>>9628 The simplest explanation is that they just put it in the bank, like anyone else. A company with 100 employees who between them earn on average the average earnings will have a monthly payroll run into 6 figures. Once you start throwing in various other bills, a medium sized company typically needs a float of several million in their bank account at any given time. What if they've got more cash than that on hand? Doesn't matter. It's hardly worth the time and effort risking putting the company's cash into potentially illiquid things when they can just stick it in the bank and not worry about it (at least, if they've chosen a sensible bank).
This. Liquidity is key. You may lose out on a few percent of interest, which can run in the tens of thousands per year, by not investing unneeded liquidity reserves, but in turn you decrease liquidity risks by not having the money tied up in illiquid assets or even near-cash assets that you could be forced to sell at a loss when unforesen spikes in your needed liquidity hit you.
You were talking about a company with 100 employees and a monthly payroll of six figures and cash reserves of several million. That does not equal tens of millions of lost interest.
If your average cash float is £3M, then 2 percent interest after tax equals £60K. It was probably less the last couple of years with BoE zero-interest.
Maybe it really is catching. Maybe there's still time for economic armageddon to kill us all, but hopefully also take down the people we hate, after all.
The question is how far it will be spreading. The 2008 banking crisis tanked the real economy because nobody was trusting anybody anymore and there was a complete credit freeze especially in short-term lending, which then jumped over and affected everything from payroll lending to supply financing and ground the real economy to a halt.
A few big banks going belly up isn't going to crash the entire system. I think that at least for the time being, it's more the fear of a banking sector crash than the actual possibility that there will be one.
>>9644 I get the feeling it never really stopped happening after last time. Although whether this means everything will just continue to be bad, or somehow get even worse, remains to be seen. I suspect things will continue as normal.
>>9644 Nah it's fine. What's driving down stocks at the moment is fears that US banks seem to be slightly out of step with the coordinated actions elsewhere but the Fed has indicated they will bury alive any bank that tries to collapse under an avalanche of dollars.
>UK banking system remains safe - Downing Street
Why don't they just shut the fuck up? Everyone sees a government official's lips moving anything as a massive sell signal. The harder they profess the more the opposite is true. If they'd throw comms down a well and just announce actions then nobody would feel the need to panic.
>>9647 >Why don't they just shut the fuck up? Everyone sees a government official's lips moving anything as a massive sell signal. The harder they profess the more the opposite is true. If they'd throw comms down a well and just announce actions then nobody would feel the need to panic.
Someone told me the other day that Robert Peston caused the run on Northern Rock. I'm too young to remember, but when I Google it there is a number of results about it:
>Television's Robert Peston was finally hauled before MPs yesterday to face accusations that his reporting of the global financial crisis helped destroy the British banking system.
>Cometh the terrifying hour, cometh the slightly alarming man. Robert Peston, the BBC's business editor, is so all over this financial crisis his surname has become a verb in certain City drinking holes. "He's Pestoned it" means he's gone too far, following the moment Peston's claim that Northern Rock was insolvent produced a run on the bank and its subsequent collapse.
>Germany's largest bank has become the focus in a new wave of selling across banking and wider financial stocks, less than a week after the forced takeover of Credit Suisse. Deutsche Bank shares were more than 13% down in volatile trading Europe-wide. The bank's so-called credit default swap rate was up more than 18%. It essentially represents a sharp jump in its cost of insuring against the risk of default.
https://news.sky.com/story/deutsche-bank-heads-new-rout-for-banking-stocks-on-financial-markets-12841440
You know the world is really getting back to the good old days when we only have to worry about a European financial crisis. Maybe it's time someone looks at Greece's books again.
>>9649 On the plus side, my cryptocurrency investments have skyrocketed to nearly 50% of what they were worth when I bought them. It's an ill wind indeed that blows no man any good.
