Thai banks unaffected by two recent US bank failures

[chockchai12]

See here from Sunday night for Pre US Government update:-  

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[worldexpress]

Quote

She said... adding that the impact of the closures on the US economy is limited, because the services of the two banks were limited, unlike ordinary commercial banks, ...

She clearly has no understanding how the (U.S.) banks work and the scope of SVB's effect and the impact on the businesses it served.

[Blumpie]

13 hours ago, SiSePuede419 said:

Amazing how many International Banking experts there are here. ????

Its amazing how many experts there are on everything on every subject here.

Excuse me, I'm going to look in the mirror now.  Have a good day.  ????  

[CartagenaWarlock]

8 hours ago, nigelforbes said:

But the ball has started rolling and it’s a big and important ball. Everyone starts to understand that raising interest rates has created an unrealised loss at many banks.

My question is why do they hold long term treasury bonds? I hold short term treasury bonds laddered. So every three months some portion matures and roll over to the next ladder automatically. If interest rates start falling, I can exit slowly. And if it increases I catch up slowly. 

Edited March 14, 2023 by CartagenaWarlock

[Dazkkk]

20 hours ago, Jingthing said:

Any bank anywhere will be in trouble if there is a run on the bank caused by panic, justified or not. In the case of SVB it was justified. 

Wasn’t it down to the fact SVB ignored history and got too deep in the bond markets which were backed by mortgages. 
Whatever it was, deposits are pretty safe for those with accounts in those banks.  

Edited March 14, 2023 by Dazkkk

[Dan O]

13 hours ago, nigelforbes said:

The connectivity of these issues struck me so I thought I'd lay out the sequence of events and the implications:

 

The Fed raises interest rates several times and a solitary bank fails to adjust its assets and liabilities. Short sellers spot the mismatch and place bets that the bank will fail. Slowly, the bets increase until almost everyone in the financial world has heard about the problem, even Moody's spots it and tells the bank it will be downgraded. VC’s advise customers to withdraw their funds and a bank run follows. Finally the FDIC decides to act and quickly takes over the bank.

 

But the ball has started rolling and it’s a big and important ball. Everyone starts to understand that raising interest rates has created an unrealised loss at many banks. This is because Treasury bonds held in the “hold to maturity” category now have a lower redemption value than previously when interest rates were lower. Depositors at other regional banks now think their funds are also at risk so they start to withdraw funds from the smaller banks, this imperils the smaller banks and all the account holders. Several regional banks begin to suffer liquidity problems which puts them at risk, the short sellers had moved in earlier and were betting on those banks also failing. Now all the funds from the smaller regional banks are flowing into the bigger banks so attention turns to them, consumers are afraid all the smaller banks will fail. Now the short sellers are targeting the bigger banks whose share values fall, this leads to large falls in the equity markets which hurts anyone with savings, investments or a pension fund. The cost to insure deposits at major international banks such Credit Suisse increase to high levels and now threatens the banks business, their customers business and all depositors,  

 

The value of USD falls because of bank default risk so exchange rates get hit and non-USD foreign currency holding consumers get hurt. The Fed sees what’s happening and decide they can no longer risk raising interest further to try and tame inflation which must remain high so everyone has to pay more for goods. Eventually one or two of the big banks have to be taken over which means people lose their jobs.

 

I think this is broadly where we are right now but we don’t have full sight yet of a large bank failure but one is clearly under great stress.

 

 

Not sure of your explanation. They failed because they used short term deposits to invest in longer term investments without proper reserves. Interest rates affect the scheme but had they held proper reserves and not done what they did with their short term deposits they would have not had issues. They were also overweight in crypto investments which were also poor performers.  You can't blame interest rates for that, its bad management pure and simple. The Fed hasn't decided to halt interest rate increases. Those words are coming from the market not the Fed

[Dan O]

12 hours ago, BusyB said:

I'd rather not ... tens of thousands of commercial companies folding would potentially worse than 2008 - that's why they guaranteed the deposits so fast. Shareholders and the rest lose out for a change.

 

It's especially critical because this is the economy's pioneer sector - tech innovation, hardware and software.

Share holders lose but they didn't waste any time making sure the bonus package was paid out before shutting down 

[Dan O]

4 hours ago, CartagenaWarlock said:

My question is why do they hold long term treasury bonds? I hold short term treasury bonds laddered. So every three months some portion matures and roll over to the next ladder automatically. If interest rates start falling, I can exit slowly. And if it increases I catch up slowly. 

Thats why they failed. They should never have invested short term deposits in longer term instruments without proper reserves which they didn't have. 

[nigelforbes]

4 hours ago, CartagenaWarlock said:

My question is why do they hold long term treasury bonds? I hold short term treasury bonds laddered. So every three months some portion matures and roll over to the next ladder automatically. If interest rates start falling, I can exit slowly. And if it increases I catch up slowly. 

Banks are supposed to hold a mixture of bond durations, short, medium and long, matched to their liabilities. The problem in this instance is that banks piled into long duration bonds at a time when they were cheap.

[nigelforbes]

51 minutes ago, Dan O said:

Not sure of your explanation. They failed because they used short term deposits to invest in longer term investments without proper reserves. Interest rates affect the scheme but had they held proper reserves and not done what they did with their short term deposits they would have not had issues. They were also overweight in crypto investments which were also poor performers.  You can't blame interest rates for that, its bad management pure and simple. The Fed hasn't decided to halt interest rate increases. Those words are coming from the market not the Fed

If you read again what I wrote you'll see that I said, "The Fed raises interest rates several times and a solitary bank fails to adjust its assets and liabilities. Short sellers spot the mismatch and place bets that the bank will fail". What I wrote is the same as you saying it's bad (A/L and risk) management. Prior to the interest rate rises, the banks "hold to maturity" profile was fine, even if they were all long dated bonds because they remained above the threshold. As rates increased, the need for greater short term reserves increased but this wasn't actioned. From Fox:

 

"What happened is fairly simple: when interest rates were at historic lows, SVB invested depositors' funds in long-term Treasury bonds. But as the Federal Reserve increased interest rates to combat inflation, the price of those bonds cratered, taking SVB with it. When interest rates went up, the assets lost their value and put the institution in a problematic situation,"

 

https://finance.yahoo.com/news/silicon-valley-bank-committed-one-135059554.html

 

The Fed not raising rates is part of my extrapolation of events rather than fact. 

Edited March 14, 2023 by nigelforbes

[Bim Smith]

Believe nothing until officially denied. When the Domino effect kicks in no bank in the world will be unaffected. This is only the beginning of the demise of fiat currency. That's why the Fed along with the bank of Thailand and England and many others around the world signed up to digital currency two years ago. Few noticed in the middle of a pandemic.

[hotchilli]

On 3/13/2023 at 8:23 PM, snoop1130 said:

Thailand’s commercial banks and other financial institutions have not been affected by the recent failures the US’s Silicon Valley Bank and New York-based Signature Bank in the past week, Deputy Government Spokesperson Traisuree Traisoranakul said today (Monday).

Teflon Thailand.

[nigelforbes]

This of course is not strictly correct, banks globally lost value and Thai banks were no different.

 

https://www.set.or.th/en/market/index/set/fincial/bank

 

Edited March 14, 2023 by nigelforbes

[Hawaiian]

2 hours ago, Bim Smith said:

Believe nothing until officially denied. When the Domino effect kicks in no bank in the world will be unaffected. This is only the beginning of the demise of fiat currency. That's why the Fed along with the bank of Thailand and England and many others around the world signed up to digital currency two years ago. Few noticed in the middle of a pandemic.

I think the Chinese adopted digital currency to better keep track of money fleeing the country.

Wealthy Chinese have been selling assets and sending the proceeds overseas.  They believe the cash strapped CCP controlled government will either freeze and/or seize their assets, some of it

acquired through corruption.

[nigelforbes]

2 minutes ago, Hawaiian said:

I think the Chinese adopted digital currency to better keep track of money fleeing the country.

Wealthy Chinese have been selling assets and sending the proceeds overseas.  They believe the cash strapped CCP controlled government will either freeze and/or seize their assets, some of it

acquired through corruption.

In China, companies, banks, and individuals must comply with a “closed” capital account policy. This means that money cannot be freely moved into or out of the country unless it abides by strict foreign exchange rules.

 

https://www.tradecommissioner.gc.ca/china-chine/control-controle.aspx?lang=eng

[Hawaiian]

2 minutes ago, nigelforbes said:

In China, companies, banks, and individuals must comply with a “closed” capital account policy. This means that money cannot be freely moved into or out of the country unless it abides by strict foreign exchange rules.

 

https://www.tradecommissioner.gc.ca/china-chine/control-controle.aspx?lang=eng

Are you saying that it never happens?  I recall reading that some banking officials were busted for violating the rules, but not before substantial amounts of money got through.  As I mentioned, digital currency is easier to track.

Corruption is widespread in China and Xi's one-man rule is supposedly meant to control it.  Much of the scheming goes on in outlying provinces and is not always discovered in time to prevent  a lot of money from disappearing

[nigelforbes]

3 minutes ago, Hawaiian said:

Are you saying that it never happens?  I recall reading that some banking officials were busted for violating the rules, but not before substantial amounts of money got through.  As I mentioned, digital currency is easier to track.

Corruption is widespread in China and Xi's one-man rule is supposedly meant to control it.  Much of the scheming goes on in outlying provinces and is not always discovered in time to prevent  a lot of money from disappearing

Did I say it never happens! I merely gave you a link to policy on the topic you were discussing. It is however not a simple matter to transfer money out of China, above and beyond the low monthly limits set by government. We have Chinese friends and neighbors who frequently have problems paying school fees here, for this reason. The casino's of Macau used to be a popular route but that has now largely closed plus there are onerous restrictions on bank accounts in Hong Kong for mainlanders.

 

 

[Dan O]

6 hours ago, nigelforbes said:

If you read again what I wrote you'll see that I said, "The Fed raises interest rates several times and a solitary bank fails to adjust its assets and liabilities. Short sellers spot the mismatch and place bets that the bank will fail". What I wrote is the same as you saying it's bad (A/L and risk) management. Prior to the interest rate rises, the banks "hold to maturity" profile was fine, even if they were all long dated bonds because they remained above the threshold. As rates increased, the need for greater short term reserves increased but this wasn't actioned. From Fox:

 

"What happened is fairly simple: when interest rates were at historic lows, SVB invested depositors' funds in long-term Treasury bonds. But as the Federal Reserve increased interest rates to combat inflation, the price of those bonds cratered, taking SVB with it. When interest rates went up, the assets lost their value and put the institution in a problematic situation,"

 

https://finance.yahoo.com/news/silicon-valley-bank-committed-one-135059554.html

 

The Fed not raising rates is part of my extrapolation of events rather than fact. 

They should never have invested short term deposits in any long term investments without proper ratios of reserves, which they did not follow. Thats what caused the imbalance and the follow on issue. Every financial institution has the same playing field but only 2 or 3 banks tried to be a bit greedy and didn't follow good banking practices and as a Regional Bank weren't required to under regulatory oversight

[Hawaiian]

23 minutes ago, nigelforbes said:

Did I say it never happens! I merely gave you a link to policy on the topic you were discussing. It is however not a simple matter to transfer money out of China, above and beyond the low monthly limits set by government. We have Chinese friends and neighbors who frequently have problems paying school fees here, for this reason. The casino's of Macau used to be a popular route but that has now largely closed plus there are onerous restrictions on bank accounts in Hong Kong for mainlanders.

 

 

Sorry.  Didn't mean to come on so strong.  I appreciate you providing the link.  I was basically saying that the adoption of crypto was an added layer of currency control to the already strict rules in place.  Supposedly, there are other reasons for China signing on to crypto currency, but that is a topic for another day.

[nigelforbes]

11 minutes ago, Dan O said:

They should never have invested short term deposits in any long term investments without proper ratios of reserves, which they did not follow. Thats what caused the imbalance and the follow on issue. Every financial institution has the same playing field but only 2 or 3 banks tried to be a bit greedy and didn't follow good banking practices and as a Regional Bank weren't required to under regulatory oversight

We don't disagree.

 

It can be argued however that with their high value customer account base and almost complete lack of traditional small value customers, that short term funding requirements were excessive and probably couldn't be met (am unsure). The bank run saw about 25% of their deposits withdrawn, even the best capitalized banks in the US don't have 25% short term liquidity, Basel Tier 1 and II capital adequacy ratio's are nowhere near that level.

[vandeventer]

Relax your 800,000 baht visa deposit is safe the bank guarantees' it.

[nigelforbes]

3 minutes ago, vandeventer said:

Relax your 800,000 baht visa deposit is safe the bank guarantees' it.

Er, no, the DPA guarantees it, the DPA is a an agency whose Board comprise government, BOT, legal and financial and economic experts.