Thread by @SAH16928046

Not every financial company should be structured as a bank, thereby accepting deposits, intermediating funds across markets, and reporting capital adequacy ratios using the @BIS guidelines.
This is the lesson I derive from the #SVBCollapse
#SVBCrash

@Bis What is the point of pasting SVB CAR and Capital Ratio Metrics?
What sense could one derive from them before the run began?
They didn't reveal the full picture to the creditors, depositors, or shareholders.
CAR is a metric which exemplifies loss absorption capacity
Now?#SVBCrash

We need to revert to the Glass Steagall Act to understand economic history.
Why it was introduced in the aftermath of the Great Depression.
Why FDR and his team drew Chinese walls between Investment and Retail Banking institutions?
federalreservehistory.org/essays/glass-s….

You cannot have a commercial banking financial intermediation model run alongside Private Equity, Venture Capital, Seed Capital Sponsorships, etc funding and investing business models.
It's an ALM mismatch on the book which will be hard to hedge from a treasury risk perspective

#SVBBank risk managers should read how PE Securitization could have helped to create more liquidity from transactions with late exit strategies and lengthy payback periods.
Apart from mismanaging b/s rate risk
It's complex, but just some food for thought.
buyoutsinsider.com/private-equity…

Before they go after the management, the auditors, or any other gatekeeper within the GRC board or management staffing units, they need to ask the ECAI's External Credit Assessment Institutions some tough questions.
#SVBCrash
@MoodysInvSvc downgraded on 10/3/2023.