[basseq]

No, and that's the point. I understand that banks mark long-term bonds as hold-to-maturity (and only then can list them at par on their balance sheet). But they actually have to hold them. Otherwise, they have to mark them to market, and any sales of HTM bonds flip the entire tranche over to MTM.

So part of the problem is that SVB had a reasonable-looking balance sheet of HTM bonds, then had to sell some at market, which flipped their entire portfolio to MTM and destroyed their balance sheet.

E.g., a simple balance sheet:

  Assets                   Qty.   Par   Market   Total
  -----
  Mark To Market Bonds     10k    $1k   $0.8k    $8Mn
  Hold To Maturity Bonds   1M     $1k   $0.8k    $1Bn
  Total                                          $1.08Bn

But then let's say I have $16M of withdrawals. I sell all of my short-term bonds for $8M, but have to cover another $8M, so I sell another 10k bonds at market price.

But, oh shit, now all my long-term bonds have to be marked to market, so now my balance sheet looks like this:

  Assets                   Qty.   Par   Market   Total
  -----
  Mark To Market Bonds     990k   $1k   $0.8k    $792Mn
  Total                                          $792Mn

$16M of outflows have reduced the assets on my balance sheet by two hundred and sixteen million.

[landemva]

To allow the bond sale before they had a cash infusion basically flushed the business. I wonder if board of directors had an understanding of how it would detonate the balance sheet. After that, the regulators took the obvious necessary action.

[UncleEntity]

And people saw this is what they were doing and were tweeting about it in advance of all their “problems”.

[basseq]

Sure, though in all fairness, I understand it's standard GAAP accounting for all banks, and your balance sheet has to have a footnote explaining the market value as well. I.e., this particular play or accounting standard is extremely common.

It seems like SVB was perhaps a little more exposed to interest rate risk than others, and had a pool of depositors that were more likely to withdraw significant funds in lockstep.