Understanding How a Bank can Fail

This past week, Silicon Valley Bank (SVB) was closed by banking regulators. Let’s understand the basics of how this happened and why it matters to the tech industry. 

SHOW: 701

CLOUD NEWS OF THE WEEK - http://bit.ly/cloudcast-cnotw

CHECK OUT OUR NEW PODCAST - "CLOUDCAST BASICS"

SHOW SPONSORS:

• CloudZero – Cloud Cost Visibility and Savings
• ​​CloudZero provides immediate and ongoing savings with 100% visibility into your total cloud spend
• Solve your IAM mess with Strata's Identity Orchestration platform
• Have an identity challenge you thought was too big, too complicated, or too expensive to fix? Let us solve it for you! Visit strata.io/cloudcast to share your toughest IAM challenge and receive a set of AirPods Pro
• Make Cloud Native Ubiquitous with Cloud Native Computing Foundation (CNCF)
• Join the foundation of doers, CNCF is the open source, vendor-neutral hub of cloud native computing, hosting projects like Kubernetes and Prometheus to make cloud native universal and sustainable
• GitOpsCon + CDCon Registration Code: PODCAST10 for 10% off

SHOW NOTES:

• FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California (March 10)
• FDIC Update on SVB Bank and Access to Deposits (March 12)
• Joint Statement by Department of Treasury, Federal Reserve and FDIC (March 12)

HOW CAN A BANK WITH SO MUCH MONEY SHUT DOWN?

• Banks never hold all the money that they have on the books as deposits
• Banks manage a portfolio of investments
• Banks try and manage the portfolio within certain ratios
• Banks have regulations

LEVERAGE, INTEREST RATES, RISK, TIMELINES, COMMUNICATIONS and PANICS

• Basics Part I - Systems built on Trust, Regulations to Enforce Actions
• Basics Part II - What is SVB?, Deposits vs. Investments, Leverage, Interest Rates
• Higher interest rates increases the risk of existing investments
• Valuations vs. Valuations on Paper
• Insurance, Diversified Portfolio
• Cloud Analogies - Single vs. Multi-Cloud, Shared Resources Risks, Profitability of a Service, Best Practices vs. Practicality, Rising Costs (or Shortages) 

FEEDBACK?

• Email: show at the cloudcast dot net
• Twitter: @thecloudcastnet