Breakingviews - Big bank selloff rests on tiny kernel of truth

Such a scenario is practically unthinkable at a global, systemically important bank. Those institutions are unlikely to suffer anything like the same level of deposit outflows. About 60% of deposit funding at large U.S. banks comes from retail customers, according to JPMorgan analysts, who tend to stay put. Compare that with SVB’s customer base, which is tilted towards cash-starved startups.

Second, even if a big lender did have to sell, it wouldn’t necessarily suffer an equity shortfall. Large U.S. banks, unlike smaller ones, must deduct paper losses on parts of their securities portfolios from their capital every quarter. That limits any incremental hit from a rushed sale. In Europe, meanwhile, banks often sit on piles of sovereign bonds that aren’t for sale, and are therefore not marked to market prices.

Still, there’s a microscopic grain of truth behind investors’ concerns. As interest rates rise banks are charging more for loans. But customers, particularly companies and wealthy individuals, are also shifting their money around in search of a better return. Lenders have to pay up to keep them, or risk having to fund more of their balance sheets in pricier wholesale markets. That’s a major change, since banks have in recent years had more deposits than they needed.

Breakingviews LiamWardProud Kernel of truth: inflation is not transitory, Biden’s economic plan is not working, recessions always have these same hallmarks. 🙃

Breakingviews LiamWardProud

Breakingviews LiamWardProud Me watching Silicon Valley Bank…

Breakingviews LiamWardProud 😘😘😘😘😘😘😘😘😘😘😘

Unleash the devil inside you and be cool bro: start writing travaux instead of travails, not givin a shit of what your pundit boss thinks about it.

The accounting to the rescue? This not reassuring 👇

Meltdowns always start with a “kernel” of truth.

it's a classic bank run on $sivb. now $frc SpeakerMcCarthy's California is f*kked. where he gunn get his campaign ca$h now?

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