Special Episode: Silicon Valley Bank Crisis Explained | Can this happen in India? | SVB Bank latest
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- čas přidán 7. 07. 2024
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The latest SVB or Silicon Valley Bank news is very troubling. SVB Crisis has come at a time when US citizens and people across the world are battling many macroeconomic and financial problems. SVB Bank news has caught many people off guard. Because before Silicon Valley Bank crashed, it grew 3 times from 2019 to 2022. SVB collapse has its roots in multiple problems arising out of fiscal policy and lack of diversification. In this video, I’ve explained why silicon valley bank crashed and why was silicon valley bank in trouble.
Silicon Valley Bank started in 1983 with the sole aim of supporting tech startups and technology companies in silicon valley. As of today, it supports more than 50% of the venture-backed tech startups in the US. This is the USP of SVB. Silicon Valley Bank is focused on one single ecosystem as it’s managing its $200 Billion balance sheet. Because of this while the collapse was happening, the FED didn’t even bother to look into this bank. Silicon Valley Bank is located on the west coast instead of the East Coast where most of the action happens in the USA.
During Covid, the US government rolled out stimulus packages and also printed a lot of money. Because of this, after covid, there was excess money in the market. Where did this money go? Into various bank accounts and from there it got invested in various businesses. The deposits of SVB grew from $75 Billion to $195 Billion in only 3 years. But still, the deposits in SVB grew at a much greater rate than deposits grew in other banks. The rate of average deposit growth for other banks in the US was 37% while the deposits in SVB grew by 200%. This is a massive jump for SVB.
So what triggered this collapse? First of all, SVB didn’t have a Chief Risk Officer from March 2022 to January 2023. For 10 months they didn’t have a CRO. Their CRO resigned in March 2022 and they took a long time to hire a new CRO. The deposit base of SVB was falling during this time. It came down from $195 Billion to $175 Billion in December 2022. If they had had a CRO, then that person would’ve highlighted this issue in the board meetings. Deposits were going down because there was a funding winter in which startups were not receiving money from investors. Because of this startups were withdrawing money from their accounts with Silicon Valley Bank to meet the expenses. But these startups were not putting this money back in. Recently the deposits of SVB came down to $160 Billion.
Around this time in 2022, nobody was interested in taking loans but SVB, being a bank, had to make some money from its deposits. Since nobody was taking loans, SVB went ahead and invested in Government bonds. These bonds are considered risk-free investment instruments but they provide very low-interest rates. But in 2022, the interest rates increased. At the same time, SVB depositors wanted to withdraw their money. SVB had to sell these bonds at a loss to meet the depositors’ demand for money. SVB sold $21 Billion worth of government bonds which resulted in an after-tax loss of $1.8 Billion. SVB issued a statement declaring the same.
After this, SVB said that it’d raise funds worth $1.25 Billion from the market against shares to make up for the incurred losses. And an additional $500 Million were to be raised from General Atlantic. But the timing couldn’t have been worse for Silicon Valley Bank. Because SVB announced losses on the same day as another bank was going down, SVB customers wanted to take their money out. Since SVB operates in a niched Startup Ecosystem when one investor sent out a note to their portfolio companies to withdraw money from SVB, a large number of people showed up to withdraw their money. This caused a bank run.
Chapters
0:00 - Intro
0:41 - SVB Latest news
1:30 - Pointers
1:56 - What is SVB?
4:00 - What triggered Collapse?
5:55 - Selling Gov Bonds at a loss
8:55 - Bank Run
10:28 - History of Bank Runs
11:44 - 2008 Crisis Management
12:42 - India
13:47 - Future of SVB
15:05 - Takeaways
Very effective content sir
Keep going thanks for your efforts and time
Hi Pavan, Well explained and also video quality has gone up. It is very hard to believe the sheer ignorance from Bank side usually whenever MBS (Mortgage Backed Securities) rate goes up Fed used to (but not this time) start buying to keep up the price in secondary market which currently is 74$ they are getting on invested 100$. The thing is they have high quality assets but not at right price. Excited to see what happens next.
Great video! I'm keen on seeing how the events unfold in the coming weeks.
I guess just following institutional investors' actions says a lot about what's going on in the market.
Hi Pavan, was waiting for your video to come out on this topic since morning. Great explanation in simple words without going into not much needed afs/htm/balance sheet technalities.
I was waiting for this..a very crisp and to the point explanation
Great research and well articulated content.
Hello Pavan, thank you for explaining the entire thing in such a non-technical and easy to understand way. Keep up the great work, I enjoy learning through your videos and I am looking forward to more contents like this.
Regards, Sarthak.
Loved the video format and the explanation Pavan! Would love to have more such in depth analyses.
great video Pavan! Amazing learnings!
Nice initiative much appreciated for your efforts.
Keep it for 3to 4parts. So that we can get more information on topics. In 5 minutes I believe nothing can be detailed. Only if possible and if needed you can do this suggestion. Thank you for your wonderful work 🙏💗. Current video is 15 min plus. Good explanation.
Greetings from NYC! I love how simple your videos are! Also I love your enthusiasm. You earned yourself a sub!
Pavan this longer form content is really useful. I would love to also see what could have happened to prevent this in terms of a lessons learned for future niche banks or larger banks in general
Loved the video the concept and the learnings offcourse!! Please continue this series and if possible make it twice a week..
You're welcome! Absolutely will do!
This format is tough to make & would appreciate your support.
If you can share the video in your Circle! Gives me motivation to do more such videos:)
Thanks!
Thanks sir
Real case scenarios can give you a lot of learning and experience. Thank u sir👍
Consider sharing in your network if you believe this will help your friends!
@@PavanSathiraju sure sir, i will do it
Very well explained, thanks for the video!
You're welcome! Thanks for the kind words:)
This was tough to make & would appreciate your support if you can share the video in your Circle!
Gives me motivation to do more such videos:)
Thanks!
@Pavan Sathiraju Sure, will share it too!
Loved the video, Thanks for explaining the entire situation in simple way. Looking forward to next videos.
More to come! Glad you liked it:)
This was tough to make & would appreciate your support if you can share the video in your Circle!
Gives me motivation to do more such videos:)
Thanks!
Great explainer! I read about it but could understand properly for the first time through this video. Thanks for simplifying. Look forward to more such content
Nice to hear that:)
This was tough to make & would appreciate your support if you can share the video in your Circle!
Gives me motivation to do more such videos & keep it simple:)
Thanks!
To the point and well explained. Pl continue to make such videos. Loved it :)
Thanks a lot 😊
Great content as always.. But also Awesome bg music and video quality Pavan! 😎
Loved this in-depth long video!!
pls continue this format
Thanks for the kind words:)
This was tough to make & would appreciate your support.
Please share the video in your Circle. Would give me motivation to do more such videos:)
Thanks!
It is the best explanation so far compared to all the videos of content creators who made video related to this issue.Cheers.Keep putting out such awesome piece of content..Thanks 😊
Thanks Manan. Part 2 will come tomorrow:)
Nice. Enjoyed the in depth analysis. Would love to see more of these
More to come Kash!
Great video on giving facts.... What I fail to understand that if bank had 160 billion deposits with them still why would they be faced with such extreme event...
Was waiting from 2 days
Much awaited
Please share the feedback:)
Great video Pavan! SVB had to sell their HTM securities because their asset side had 70%+ exposure on HTM and the rest on AFS, while in the same duration their deposits grew exponentially. This specific data using the balance sheet and relevant notes could add more value to the content, maybe as an additional segment (deep dive).
Not to forget the C-Suit was dumping shared on the open market a week before the news came out, the CAO was ex-Lehman.
I think the c-SUITE dumping shares was crazy!
Rest, didn't want to make it too technical.
Hi Pavan, great analysis and lot of points came to know through you, which many of the other analysts have missed.
My question - if the fed has agreed to payback the money to all account holders who have deposits above $250000
is this money coming in as liquidity injection? how is fed going to pay the money and what will be further consequences of that injection
Great Video. Just One thing. As banks in India need to maintain a certain percentage of their deposits as Cash with RBI as Cash Reserve Ratio, and highly liquid government bonds, gold reserves, etc (SLR) to avert bank-run type situations. Does the banking system in the U.S. have such equivalents?
I could see mulitiple bank failures... Silvergate bank and signature bank.... Could you plz make a viedio why so many banks are falling
Will release one tomorrow and cover that Sourav!
Sir make videos on NPAs, PNB, ICICI and other banking crisis in India.
Hi Pavan, Great video. I trade commodity (gold) in the forex markets. It would be great to learn the fundamentals on this pair XAUUSD and how to perceive the gold value for future. Thanks!
Even though sbi, axis bank... Etc has huge cash reserves... Why new fintech startups are coming?
Why can't gaint banks starr thier own fintech division?
Does that show inefficiency of these banking giants?
That is an excellent explanation Pavan; one thing I would suggest to you to make videos more engaging is that you can add some artistic slides of the issue so that people very new to such type of issues get the hang of what u are trying to convey
Please check the latest video on Credit Suisse. I hope that is what you mean
Hi Pavan thanks for this instructive vidéo. I think you forgot to pinpoint one key element that causes most of the trouble: SVB lacked to follow prudential rules and regulatory agencies also may be for personal interest missed to monitor this . Since the 2008 some high level prudential rules was set up to avoid those kind of situation and i also read in a News that Former US goverment permitted a waiver to follow the rule for SVB because the management of SVB was closes friend of Trump
That is a conspiracy theory. Will dig deep into it in the part 2 of the video:)
The content is good sir. If possible change the microphone. The voice was bit low. Otherwise rest everything is good.
Quite detailed and perspective from multiple directions could be seen.
Done. Hope tomorrow/day after you won't find this issue:)
Really love your content and Analysis, Let me know if I can help you anyway in your content creation journey .
Would love to help you so that I can learn from you as well.
Please do share in your network/ LinkedIn & write your 3 takeaways.
You can tag me & the video link.
Would be massively helpful:)
volume of the video is very low