SVB Crisis Explained

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The SVB situation is explained by Jay Singh, Former Goldman Sachs Manager of billion dollar funds and founder of Specialist Research. Tom Nash is interviewing Jay Singh.

The CEO of Silicon Valley Bank bought $90 billion of ten-year securities. They did not offset the long-duration interest risk. They did not have interest rate hedges.

When rates rise, fixed-income prices fall. A general rule of thumb is for every one year of “duration,” each 1% interest rate move impacts the price of the bond by: 1% x Duration

A 1% move on a 9 yr duration bond is ~9% +/- on the bond price.

SVB had 25% of its deposits withdrawn in one day.

Joseph Gentile served as chief administrative officer of SVB Securities, a standalone investment bank wholly owned by parent company SVB Financial. But prior to taking that role in 2007, Gentile had a short stint as the chief financial officer for the fixed income division of Lehman Brothers’ Global Investment Bank. Gentile left Lehman Brothers 18 months before the investment bank’s collapse.

Lehman Brothers was one of the biggest financial company to go bankrupt. This happened on Sept. 15, 2008. Silicon Valley Bank is the biggest bank to fail other than Washington Mutual.

Kim Olson was hired as SVB’s chief risk officer in January. She had a senior risk management role at Deutsche Bank during the Great Recession. In 2017, Deutsche Bank was forced to pay a massive $7.2 billion penalty after admitting it lied to investors about its mortgage-backed securities.

4 thoughts on “SVB Crisis Explained”

  1. Hedging your risk isn’t for free. And it doesn’t free you from all risk. Banking is a bad business. To make money you assume risk. To assume risk is to chance dying.

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