2023 Banking Crisis

[deepblueli]

Will it affect non-US banks are my main concern. I have monies in BOC ICBC Maybank CIMB RHB SCB all foreign banks

Asia banks are mostly cash rich.

 

[sohguanh]

Asia banks are mostly cash rich.

Does this reflect the culture differences? In non-Asia borrow monies to spend is the norm whereas in Asia we like to save and scrimp? I really dunno but seeing current younger generation they are slowly following the borrow monies to spend habit so economy can spin I guess.

 

[deepblueli]

Does this reflect the culture differences? In non-Asia borrow monies to spend is the norm whereas in Asia we like to save and scrimp? I really dunno but seeing current younger generation they are slowly following the borrow monies to spend habit so economy can spin I guess.

Ya, I think so. Asian tends to save more. Maybe it is a bit subjective haha

 

[BBCWatcher]

Does this reflect the culture differences? In non-Asia borrow monies to spend is the norm whereas in Asia we like to save and scrimp?

Oh really? Have you looked at the actual data? How about household debt to GDP ratios? Here are the ones I can find (latest data):

South Korea: 105%
Hong Kong: 94.8%
Thailand: 87.5%
Japan: 67.9%
Malaysia: 67.4%
U.S.: 66.4%*
China: 61.4%**
Singapore: 49.9%

* Note that this country is unique in that a huge portion of this debt consists of 30 year fixed rate mortgages. Shiny Things is one of them. He got a 2.X% fixed rate for 30 years. And he’s thrilled, as you can imagine.

** I wouldn’t trust this number as much as others on this list. Statistical data from China can be questionable.

I really dunno but seeing current younger generation they are slowly following the borrow monies to spend habit so economy can spin I guess.

“Don’t assume.” Try to look at actual data first. ”Cultural” explanations are usually b.s. Also, there’s such a thing as too little debt. Households that refuse to borrow even when they have 2.6% HDB loans in a ~4% T-bill environment (ahem) aren’t doing themselves or the macroeconomy any favors.

 

[testingabc]

Will it affect non-US banks are my main concern. I have monies in BOC ICBC Maybank CIMB RHB SCB all foreign banks.

it probably will affect other countries bank, but I find Singapore still ok cause MAS is very strict, of course if worry just put 75K each bank

 

[a4973]

Asia banks are mostly cash rich.

would SCB be considered an Asian Bank?

 

[reddevil0728]

would SCB be considered an Asian Bank?

I think government regulation more important. So depends on which country

 

[BBCWatcher]

In the United Kingdom Silicon Valley Bank (U.K.) is not systemically important, but there might be as many as 50,000 employees of startup companies in the U.K. that could see payroll difficulties. The U.K. deposit insurance limit is £85,000, way below the U.S. limit (and the U.S. limit is also easy to multiply). The U.K. government is considering whether it might do something.

IMHO if a government wants to allow businesses to borrow against part of their uninsured deposits that might be OK all around.

 

[deepblueli]

Oh really? Have you looked at the actual data? How about household debt to GDP ratios? Here are the ones I can find (latest data):

South Korea: 105%
Hong Kong: 94.8%
Thailand: 87.5%
Japan: 67.9%
Malaysia: 67.4%
U.S.: 66.4%*
China: 61.4%**
Singapore: 49.9%

* Note that this country is unique in that a huge portion of this debt consists of 30 year fixed rate mortgages. Shiny Things is one of them. He got a 2.X% fixed rate for 30 years. And he’s thrilled, as you can imagine.

** I wouldn’t trust this number as much as others on this list. Statistical data from China can be questionable.

“Don’t assume.” Try to look at actual data first. ”Cultural” explanations are usually b.s. Also, there’s such a thing as too little debt. Households that refuse to borrow even when they have 2.6% HDB loans in a ~4% T-bill environment (ahem) aren’t doing themselves or the macroeconomy any favors.

Ya I was subjective but bank liquidity ratio in Asian banks should be higher https://asianbankingandfinance.net/...an-banks-liquidity-coverage-ratios-exceed-100

Again still quite subjective. Asians like to buy properties which explain the high debt

 

[deepblueli]

would SCB be considered an Asian Bank?

Ya I think they are Asian focused bank

 

[limster]

https://www.debt.org/faqs/americans-in-debt/demographics/
If I want to look at whether there is a culture of debt, I would look at the ratio of household debt vs household income, not GDP.

 

[BBCWatcher]

Here’s a fun fact: by standard bank risk metrics SVB was stronger than DBS. In its last quarterly report SVB’s Tier 1 capital ratio was 15% versus about 14% for DBS. SVB’s Tier 1 leverage ratio was 8% versus 6% for DBS.

For the record, DBS is an extremely well capitalized bank. DBS is most unlikely to fail. But it shows how the standard “headline” metrics don’t always reflect the full scope of risks.

 

[fr33d0m]

Gregory invested too much in treasury bonds. Hope there are no other banks in the same situation and unable to hold the bonds to maturity.

Holding treasury bonds will not get you in trouble with liquidity.

FED has repo readily available all the time for treasury bonds.

The problem with SVB is holding too little treasury bonds while holding a lot of illiquid security as collateral.

 

[BBCWatcher]

If I want to look at whether there is a culture of debt, I would look at the ratio of household debt vs household income, not GDP.

It depends on what you want to look at.

If you want to look at a “culture” prone to triggering macroeconomic problems then household debt to GDP ratios seem very appropriate. I don’t think it makes sense to look at household debt to household incomes without taking into account the structure of the debt. (And you should do that with household debt to GDP ratios too, but it’s even more important when basing on household incomes.) Shiny Things and one of my family members contribute to positive household debt measures. But they’re doing it with 30 year 2.X% fixed rate mortgages, and they’d be damn fools to pay those off any faster than required. So how should we treat that reality? Different than how we treat floating or near-floating rate household debt, that’s for sure. The U.S. seems to be unique in having 30 year fixed rate mortgages as the norm, and of course mortgages represent a huge portion of household debt.

We could also look at total household debt to total household wealth ratios, and that could also be interesting.

 

[BBCWatcher]

The problem with SVB is holding too little treasury bonds while holding a lot of illiquid security as collateral.

The problem with SVB is “big” depositors (virtually the only kind they have) launched a bank run. They withdrew over $40 billion in a single day. Even the strongest bank probably can’t handle that.

 

[fr33d0m]

The problem with SVB is “big” depositors (virtually the only kind they have) launched a bank run. They withdrew over $40 billion in a single day. Even the strongest bank probably can’t handle that.

firstly, the bank has to have a problem to have a run on it. It is not a hit on a well-run bank.

second, how much of its 200+ billion assets are in treasury bonds or alike.

With well-funded bank with enough liquidity coverage, the FED is always ready to loan for short term liquidity.

 

[fr33d0m]

It depends on what you want to look at.

If you want to look at a “culture” prone to triggering macroeconomic problems then household debt to GDP ratios seem very appropriate. I don’t think it makes sense to look at household debt to household incomes without taking into account the structure of the debt. (And you should do that with household debt to GDP ratios too, but it’s even more important when basing on household incomes.) Shiny Things and one of my family members contribute to positive household debt measures. But they’re doing it with 30 year 2.X% fixed rate mortgages, and they’d be damn fools to pay those off any faster than required. So how should we treat that reality? Different than how we treat floating or near-floating rate household debt, that’s for sure. The U.S. seems to be unique in having 30 year fixed rate mortgages as the norm, and of course mortgages represent a huge portion of household debt.

We could also look at total household debt to total household wealth ratios, and that could also be interesting.

one reason that USD will be on a forever downward trend against SGD on a long term basis. There is just too much debt in US which does not follow market interest rate. The USD has to fall for that.

 

[BBCWatcher]

firstly, the bank has to have a problem to have a run on it. It is not a hit on a well-run bank.

It appears that SVB simply had the misfortune of being the bank that served mostly skittish VCs and startups in the immediate aftermath of FTX’s collapse. SVB focused primarily on one industry segment and paid no particular attention to consumer bank deposits. Their asset-related decisions don’t seem to be out of the ordinary.

Oh, and their CEO was among the group who lobbied the Trump Administration to win second class status for their banks (not to be subject to stress tests like bigger banks are), and so they reaped what they sowed in that respect.

But even so there really isn’t any bank that can withstand a bank run like this. SVBs situation didn’t seem to be bank run worthy, but the “tech bros” (and sisters) are particularly skittish right now. Many of them lost money in FTX and other cryptocurrency (and cryptocurrency adjacent) bets.

second, how much of its 200+ billion assets are in treasury bonds or alike.

A lot! If they had been in TIPS specifically this would’ve all played out very differently.

With well-funded bank with enough liquidity coverage, the FED is always ready to loan for short term liquidity.

~$42 billion in 1 day? Nope. The regulators had to shut it down. They’d shut any bank of that size or similar with that sort of outflow. No matter what the assets.

In an actual financial crisis (“we’ll supply unlimited liquidity“), different story. But this is “peacetime,” and they couldn’t even wait for 4 PM on Friday.

 

[BBCWatcher]

one reason that USD will be on a forever downward trend against SGD on a long term basis. There is just too much debt in US which does not follow market interest rate. The USD has to fall for that.

Why? I don’t follow your logic, especially considering that there are many forms of debt besides mortgage debt including floating rate (and near floating rate) commercial and government debt.

Would you argue that the Singapore dollar must fall (relative to the U.S. dollar) because the Monetary Authority of Singapore issues 50 year bonds and the U.S. Treasury only goes out to 30? Because that sure seems like the same logic, and it doesn’t make any sense to me either.

 

[fr33d0m]

It appears that SVB simply had the misfortune of being the bank that served mostly skittish VCs and startups in the immediate aftermath of FTX’s collapse. SVB focused primarily on one industry segment and paid no particular attention to consumer bank deposits. Their asset-related decisions don’t seem to be out of the ordinary.

Oh, and their CEO was among the group who lobbied the Trump Administration to win second class status for their banks (not to be subject to stress tests like bigger banks are), and so they reaped what they sowed in that respect.

But even so there really isn’t any bank that can withstand a bank run like this. SVBs situation didn’t seem to be bank run worthy, but the “tech bros” (and sisters) are particularly skittish right now. Many of them lost money in FTX and other cryptocurrency (and cryptocurrency adjacent) bets.

A lot! If they had been in TIPS specifically this would’ve all played out very differently.

~$42 billion in 1 day? Nope. The regulators had to shut it down. They’d shut any bank of that size or similar with that sort of outflow. No matter what the assets.

In an actual financial crisis (“we’ll supply unlimited liquidity“), different story. But this is “peacetime,” and they couldn’t even wait for 4 PM on Friday.

shutting down a bank is costly. The FDIC/Fed/whatever does not just shut down the bank simply because of liquidity issue. If the bank is well-run, with good capital ratio and liquidity, the Fed would rather do repo and lending, than taking over the bank. After all, they don't know how to run a bank successfully.

42 billion is a lot, but the money does not just leave the system. It is just on the book. If the bank is worth of it, others can easily pick it up. Also, 42 billion happened after the bank wanted a 2+ billion capital injection. That's the reason why it failed, not the 42 billion after that.

The bank had a short of capital of 2+ billion. Unless someone was willing to give it 2+ billion, it would have failed anyway. 42 billion just made fail faster, fail early.