At one point its investment portfolio had swelled to 57pc of total assets. SVB started to look less like a bank and more like an investment firm with a massive unhedged position in US government debt.
Say – imagine – that capital needs to be 10% of total assets. Not far off reality.
And you’ve 60% of assets in long bonds. Which then fall in price as interest rates move from zero to 4%. None of those numbers exactly right but.
We could certainly believe – depending upon how long those bonds were – that the 60% has fallen in value so much that the 10% capital is all gone.
Which is, roughly enough, what did actually happen.
Ir was a massive unhedged position in Mortgage Backed Securities and some Government debt to be more accurate. But otherwise correct AFAICT