Yeah, SVB failed because of an deposit duration/asset maturity mismatch, which couldn’t be corrected due to the cost of rolling those assets, which was a result of terrible risk management on their balance sheet. Their completely loss of liquidity was a function of that. Not a function of the bank being insolvent.
Discussion
Thanks for clarifying that, Mike.
Yep!
Borrow short lend long is the root of many a bankrupt bank.
Surprised people still put money in such institutions.
They get crunched every single rate hike cycle.
I guess people have short memories or a too young to know better.
if they were to liquidate the rest of their long duration assets at current market value would they have enough capital to cover deposits?
But didn't those mistakes then end up making them insolvent?
To me, if you can't pay out what's owed at any moment, you're insolvent. Certainly their practices led to that, no?