Files & Resources: breakingintowallstreet.com/kb/bank-modeling/bank-regulatory-capital/ More coverage of the recent bank failures and acquisitions: mergersandinquisitions.com/silicon-valley-bank/ mergersandinquisitions.com/ubs-and-credit-suisse/
I'm a sophomore who's literally taken one course on pricing fixed-income securities and this seems a plain-vanilla topic for me to understand. I just can't stop thinking how in the hell SVB-with a ton of MBAs, MFs, experienced bankers, traders, quants, ex-government officials, and god knows what other ex-wallst gems on their payroll-couldn't see this coming.
You would be surprised how stupid some of these people actually are. Many people in industries like finance and tech show fancy credentials, degrees, etc., but then have no idea what they're actually doing in real life. Groupthink prevails, and no one ever wants to take responsibility for any problems. It also seems to be getting worse over time as more things are "automated," and fewer people understand the fundamentals.
Probably a lot of people in SVB that knew the state of their risk position without adressing it. As you say, duration risk and bankrun risk is banking 101. The combination of short interest rates positions and unsecurded venture capital deposits was doomed to fail at some point, wasn’t it?
The AFS securities for SVB were MTM type but it opted out theses losses from the regulatory capital,which FEd allows bank to do,this means that their regulatory capital position never reflected the unrealized losses from AFS securities , when it sold them,the loss of 1.8B was already there in the equity but was not present in the regulatory capital ratios before and whe finally realized in the regulatory capital, it meant insolvency
Yes, that is the point made in the video and in the articles above. The $1.8B realized loss was relatively minor vs. the unrealized losses on the HTM securities. But the main point is that the company never should have had losses to this extent anyway if they had had proper risk management and someone in charge of *thinking* about things like interest rates and duration.
Thank u so much, Brian! Wanted to ask u, what resources (maybe textbooks, courses) would u recommend to grasp banking? I am somewhat on a beginner level.))
Thanks. We have a full Bank Modeling course: breakingintowallstreet.com/bank-modeling/ But if you are just starting out and want something simpler/free, check out all the other coverage of banks/insurance on this channel, on the BIWS Knowledge Base page, and on M&I. Just do a search for "financial institutions" or "bank modeling" or "insurance modeling" to see.
It was created before IFRS 9 went into full effect, but it presents the Provisions for CLs the way they work under IFRS 9, i.e., they reflect future expected loan losses above the Allowance and not just incurred losses. We will probably create a new version of the course at some point, but, speaking practically, hardly anything about the mechanics will change - just the dates and numbers.
There's no course specifically on private debt, but many of the case studies in the main modeling course (Financial Modeling Mastery) are credit related or debt vs. equity or something similar. We don't like to create dozens of separate courses for these topics because they're interrelated and often reference other parts of the course.
![Working Capital and the Change in Working Capital in Valuation and Financial Modeling [REVISED]](http://i.ytimg.com/vi/tMgty8jwmHI/mqdefault.jpg)
Files & Resources:
breakingintowallstreet.com/kb/bank-modeling/bank-regulatory-capital/
More coverage of the recent bank failures and acquisitions:
mergersandinquisitions.com/silicon-valley-bank/
mergersandinquisitions.com/ubs-and-credit-suisse/
Thanks, Brian. Very helpful
Thanks for watching!
I'm a sophomore who's literally taken one course on pricing fixed-income securities and this seems a plain-vanilla topic for me to understand. I just can't stop thinking how in the hell SVB-with a ton of MBAs, MFs, experienced bankers, traders, quants, ex-government officials, and god knows what other ex-wallst gems on their payroll-couldn't see this coming.
You would be surprised how stupid some of these people actually are. Many people in industries like finance and tech show fancy credentials, degrees, etc., but then have no idea what they're actually doing in real life. Groupthink prevails, and no one ever wants to take responsibility for any problems. It also seems to be getting worse over time as more things are "automated," and fewer people understand the fundamentals.
Probably a lot of people in SVB that knew the state of their risk position without adressing it. As you say, duration risk and bankrun risk is banking 101. The combination of short interest rates positions and unsecurded venture capital deposits was doomed to fail at some point, wasn’t it?
Thanks Brian for your videos and courses.
Thanks for watching!
that's great analysis!
Thanks for watching!
The Bank of International Settlements has good amounts of content on this topic.
Thanks for sharing that.
The AFS securities for SVB were MTM type but it opted out theses losses from the regulatory capital,which FEd allows bank to do,this means that their regulatory capital position never reflected the unrealized losses from AFS securities , when it sold them,the loss of 1.8B was already there in the equity but was not present in the regulatory capital ratios before and whe finally realized in the regulatory capital, it meant insolvency
Yes, that is the point made in the video and in the articles above. The $1.8B realized loss was relatively minor vs. the unrealized losses on the HTM securities. But the main point is that the company never should have had losses to this extent anyway if they had had proper risk management and someone in charge of *thinking* about things like interest rates and duration.
Thank u so much, Brian! Wanted to ask u, what resources (maybe textbooks, courses) would u recommend to grasp banking? I am somewhat on a beginner level.))
Thanks. We have a full Bank Modeling course: breakingintowallstreet.com/bank-modeling/
But if you are just starting out and want something simpler/free, check out all the other coverage of banks/insurance on this channel, on the BIWS Knowledge Base page, and on M&I. Just do a search for "financial institutions" or "bank modeling" or "insurance modeling" to see.
I love your material so much ❤ is your banking model course up to date or is it based on banks prior to IFRS 9? I want to purchase it
It was created before IFRS 9 went into full effect, but it presents the Provisions for CLs the way they work under IFRS 9, i.e., they reflect future expected loan losses above the Allowance and not just incurred losses. We will probably create a new version of the course at some point, but, speaking practically, hardly anything about the mechanics will change - just the dates and numbers.
That's well understood thanks I will still purchase the material your work is awesome !!
@@josephkalusokoma1378 Thanks! Let us know if you have any questions.
Do you guys have an understanding private debt course?
There's no course specifically on private debt, but many of the case studies in the main modeling course (Financial Modeling Mastery) are credit related or debt vs. equity or something similar. We don't like to create dozens of separate courses for these topics because they're interrelated and often reference other parts of the course.
@@financialmodeling awesome thanks!!