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Originally Posted by Firebot
Massive banking collapse in the US in the past 48 hours with a bank run usually reserved for countries like Argentina, Sillicon Valley Bank was taken over by the FDIC earlier today and has been all over the news in the US. The 16th largest bank in the US and 2nd largest failure ever in the US, just went poof after announcing a loss of 2 billions due to bad bonds. SVB is most notable for lending to tech and healthcare startups, meaning a lot of companies will not survive this collapse.
A sign of a 2008 like collapse, or an outlier? How many banks are at risk and not valuing their bond assets correctly including in Canada? Next few weeks will be quite interesting but one thing is near certain, rates are likely to stay stagnant or go lower at this point.
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Worth noting here that their losses were mostly not "bad" bonds per se in that the bonds they bought haven't defaulted. In fact they're mostly US treasury obligations. But when their deposits left they had to raise money, and since interest rates have gone way up the value of their bonds has gone down (bond prices move inversely to interest rates). It's not a big problem if you don't have to sell, but if you need the money to pay back depositors then you have to take the losses and they didn't have enough equity to cover the hole.
All the banks in the US have exactly the same issue, and they aren't required to mark held to maturity bonds to market price unless they sell them. The ones whose deposits are checking accounts and CDs from millions of people are probably safer than the ones whose deposits are all from venture backed startups.