If SVB fails, it would be the second-largest bank failure in U.S. history and the largest since 2008, with a further 24% drop before the market
A brief timeline of what happened at Silicon Valley Bank (SVB) and whether there will be more contagion:
SVB’s deposits exploded during the 2020 bubble, growing from $62 billion at the end of 2019 to $189 billion at the end of 2021.
Due to 0% short-term interest rates, these companies made long-term investments (10+ years) as they could not generate the necessary deposit yields.
As the bond bubble burst, marking the worst bond performance in more than 100 years, they faced huge unrealized losses.
Those unrealized losses turned into $1.8 billion in realized losses, requiring the raising of another $2.25 billion in equity and debt.
A bank run begins when account holders cash out balances above $250,000 (FDIC insurance threshold)
Credit agencies have downgraded SVB’s ratings.
The pressure has now spread to all U.S. banks, which have seen more than $80 billion in market value evaporate.
As a result, SVIB fell 60% on March 9 and fell a further 24% pre-market.
As SVB's CEO scrambles to appease customers, where have we been before?