# SVB – a self-fulfilling prophecy / Prisoners Dilemma 

**Published by:** [jelca thinks](https://paragraph.com/@jess/)
**Published on:** 2023-03-13
**Categories:** fintech, other tech
**URL:** https://paragraph.com/@jess/svb

## Content

Thursday, March 9, 2023 to today SVB Overview209bn assets175bn deposits13-14bn market cap16th largest bankFinancial ProfileHeavily reliant on tech / VC companies - <10% deposits from stickier US domestic retail90% deposits uninsured – very different form other banks (in a bad way)Low loan to deposit ratio – small lending book. Aka larger securities portfolioLarge HTM investment portfolio, especially in higher yielding long duration USTs and MBS over Fed reserves and t billsHuge interest rate risk exposure50%+ assets invested in fixed rate securitiesAverage maturity of HTM bond portfolio was 6+ yearsMark to market lossesEnd of 2022: SVB had 15bn+ mark-to-market lossesWhat happened2021 deposits doubled – concentrated in longer dated USTsBank moved too slowly to shore up capital base, vulnerable to rapid deposit outflowsALM policy errors, mark to market losses exceeded equity baseUsually higher interest rates drive stronger earnings b/c loan rates rise faster than depositsSVB had the opposite happen due to customer baseWhy didn’t SVB manage the assets better, or raise capital sooner?Failed capital raise --> 42 billion deposit run on March 9Entered FDIC receivership on March 10What the government didYellen made FDIC make all depositors wholeBank Term Funding Program provides banks up to 12 months financing with qualifying assets used as collateral valued at par rather than mark to marketPrisoner’s dilemmaA lot of SV investors banded together to ask companies to continue with SVB and support the bankPeter Thiel was the first to run away Classic prisoner’s dilemma – once one starts, the rest will follow. How to get everyone to agree to stay with SVB? Impossible given human nature What I am tracking nowJ Powell is supposed to hike rates again next week (week of 3/20/2023) Which companies will benefit from thisMercury deposits sky rocketed already and offered 3mm FDIC insuredAngellist launched custodial accounts to help startupsWho will serve the large crypto institutions now that both Signature and Silvergate are deadWhat will happen to startups now and the venture landscapeSurvival modeCompanies who were valuation sensitive will not beJust get money to last 2 yearsFunders need to always have follow on capital reserved and strong capital providers around the table Silvergate Capital profile11+bn assets6+bn depositsMarket cap ~550mmFounded in 1988, pivoted to digital assets in 2013Large concentration in crypto – super risky12 bn --> 4bn deposit run in Q4, post FTXForced sale of security at huge lossesVoluntary wind down and liquidation March 8

## Publication Information

- [jelca thinks](https://paragraph.com/@jess/): Publication homepage
- [All Posts](https://paragraph.com/@jess/): More posts from this publication
- [RSS Feed](https://api.paragraph.com/blogs/rss/@jess): Subscribe to updates

## Optional

- [Collect as NFT](https://paragraph.com/@jess/svb): Support the author by collecting this post
- [View Collectors](https://paragraph.com/@jess/svb/collectors): See who has collected this post