In banking, being a little insolvent is like being a little bit pregnant
Recall that SVB’s problem was not, as with most failed banks, bad credit blowing a hole in the asset side of the balance sheet. Instead, it was a pure duration mismatch between deposit liabilities and high-quality bond assets.
Will the two actions be enough to end the threat of bank runs this week? In a rational world, they would be. While the rest of the banking system suffers from some of the same illness that SVB had, the systemic illness is simply not very severe.
The illness, as a reminder, is that in the past few years banks were flooded with deposits and invested much of them in long-term government-backed bonds. Now that rates have gone up, they have significant unrealised losses on those bonds. If they were forced to sell those securities (by a bank run, say) those losses would be realised.
Robert Armstrong FT 13 March 2023
https://www.ft.com/content/9ee5edda-a038-4992-863f-242bd69c8b79
Sedan ett år tillbaka har världens centralbanker iscensatt de snabbaste räntehöjningarna på minst en generation.
Det gick jättesmidigt. Fram till i fredags.
Nu svävar plötsligt hotet om en amerikansk bankkris över världsekonomin.
Det ska till mycket för förloppet att utvecklas i en riktning som påminner om finanskrisen 2008. Men det är ingen jättestor tröst. Även en mindre bankkris kan få ganska otrevliga följder i ekonomin.
Carl Johan von Seth DN 13 mars 2023
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