Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Okay, so we've a lot of banking news to discuss today. My last video was on Silvergate Bank, which went bust on Wednesday.

I barely got to mention Silicon Valley Bank in that video,

as it blew up on Friday as the video was going out. My plan was to cover Silicon Valley Bank today,

and of course news hit last night that Signature Bank had gone under too. So I've had a busy weekend,

and there's a lot to cover. Silicon Valley Bank's 10K, which was submitted to the SEC just two weeks ago, had one sentence

that really stood out.

We have experienced significant growth during 2021 and into 2022, including deposit growth.

If we again experience deposit growth at a greater or similar rate

than has occurred in the past, we may need to raise additional equity to support our capital

ratios. It turned out that rapid deposit growth would not be their problem and this sentence

possibly highlights the blind spot

in the vision of the management team at SVB, which led to its downfall. A number of things

went wrong at Silicon Valley Bank over the last days, weeks and years. There were huge failures

of risk management. The risk manager would have some tough questions to answer, except that it appears that they

didn't have a risk manager on staff for almost nine months of the last year.

There were issues tied to the different regulations applied to community banks when compared

to national banks in the United States.

There were investment decisions that were made that I struggle to understand.

And the final stroke was a capital raise attempt that had next to no chance of succeeding.

You simply can't raise capital from investors on the same day that you announced close

to $2 billion hole in your balance sheet and the equity is tanking in value.

...