UK Tech firms may be breathing a sigh of relief after swift action by HSBC to purchase the UK subsidiary of Silicon Valley Bank. No taxpayer money is involved – and it looks like a good piece of business for HSBC, picking up a decent set of clients and assets for the princely sum of £1.
But analysis of what happened at the parent company itself beggars belief.
There was no fancy financial engineering, no highly leveraged lending, no complex trading – just a complete neglect of the fundamentals of banking, including:
- a concentration of corporate deposits (very unsticky) rather than retail;
- assets concentrated in treasuries and mortgage back securities (volatile) rather than traditional bank lending.
Asset & Liability Management lesson 101 is pretty simple. Do not do the above. It can result in a classic bank run – which is indeed what happened when the Fed made rate hikes which were aggressive but hardly even a stress event.
Frankly speaking, and having been directly involved in the 2008 crisis and Lehman’s default, this simply should not happen in 2023.
Now it has, there should be some very red faces indeed at the regulators, as well as among all those directly responsible for the actual governance of the bank itself including the risk committee, and auditors.
Is that enough for real lessons to be learned? Here’s hoping.