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IPFS News Link • Central Banks/Banking

SVB the Iceberg in the Global Financial Meltdown Coming!

•, John Sneisen

So we've all heard that Silicone Valley Bank has failed, and it's put into FDIC receivership. The FDIC holds about $129B in assets in their insurance fund. SVB, as per their December 2022, held $173B on their balance sheet. The issues started with a bank run where they had to sell their treasuries to cover asset flight from bank deposits. The problem is that the treasuries are being sold at a loss due to rising bond rates. Most likely, Bailins are coming to SVB.

SVB Stock is down 60% overnight.

So showing the above, SVB had an influx of deposits during covid from PPP and other cash stimulus programs from the US Treasury. When SVB got a deposit, they needed a bond to cover as an asset to the deposit liability on the bank balance sheet. What happened was that interest rates rose from when they had bought the term bonds, and the value, as explained above, had fallen on their bonds. So when the deposit exodus started, they had to sell their bonds and get a lesser value back than what they paid. What this does is that when the depositors move away, they have to sell their bonds and then give the bank reserve, which is the bank that had the deposit transfer "cash." Now with a loss in the value of bonds, they want to have enough cash to cover the transfer to another bank.

That is the digital deposit transfer. Their Cash and Equivalents are only at $13.8B, so if the deposits didn't digitally transfer hands and people wanted cash, only 7.98% of depositors would withdraw cash, and it would go bankrupt. The reality is that cash and equivalents are not cash only. It's also digital deposits at other banks. This means that a physical cash withdrawal would probably collapse the bank at a 2% or even less physical cash withdrawal rate.

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