risk

Event context

On March 1 1, Silicon Valley Bank suddenly declared bankruptcy! How to say that the bank is gone? Who is Silicon Valley Bank?

Silicon Valley Bank (SVB for short) is the 16 largest commercial bank in the United States, which provides services for venture capital and technology-based startups. The basic business model of Silicon Valley Bank is to absorb deposits from technology companies and venture capital funds, lend or invest after getting the money, and earn spreads.

Since the incident in 2020, a large amount of water has been released (printing dollars crazily), so that technology companies can raise a lot of money and deposit it in Silicon Valley banks. The deposit size of SVB has doubled, from more than 60 billion dollars to 200 billion dollars in two years. The Silicon Valley banks that got the money chose to invest heavily, with 654.38+0.65 billion invested in government bonds and 654.38+00 billion invested in MBS (. Unexpectedly, since last year, the United States has continuously raised interest rates (equivalent to tightening printing money), and the risk-free income is as high as 4-5%. Then the problem is that if the interest rate rises, the bond price will fall, and the bonds held by Silicon Valley banks will face huge floating losses.

SVB intends to issue stock financing to cope with customers' withdrawals. Unexpectedly, when the news came out, everyone was frightened and wondered if there was something wrong with Silicon Valley Bank. Then, the share price of Silicon Valley Bank plummeted by 60%, and everyone panicked. Soon, the money in the hands of Silicon Valley Bank was taken out 1200, and it went bankrupt directly!

What risks have you encountered? Bankruptcy of Silicon Valley Bank

Risk classification

I. Credit risk

The main risk faced by commercial banks is credit risk. That is, the possibility that the borrower or counterparty cannot fulfill its obligations according to the agreement reached in advance.

Second, market risk.

Market risk refers to the risk that the bank's on-balance sheet and off-balance sheet business will suffer losses due to adverse changes in market prices (interest rate, exchange rate, bill price and commodity price).

Third, operational risk.

Operational risk refers to the risks caused by imperfect or problematic internal procedures, personnel and information technology systems and external events, including legal risks, but excluding strategic risks and reputation risks.

Four. liquidity risk

Liquidity risk refers to the risk that commercial banks cannot obtain enough funds in time or at a reasonable cost to pay off debts due, fulfill other payment obligations or meet the needs of normal business development.

Verb (abbreviation for verb) country risk

National risk refers to the possibility of suffering losses due to economic, political and social changes and events in other countries in international economic, trade and financial exchanges with non-nationals.

Reputation risk of intransitive verbs

Reputation risk refers to the risk of negative evaluation of commercial banks by stakeholders caused by the operation and management of commercial banks or external events.

Seven. legal risk

Legal risk refers to the risk that commercial banks may suffer losses due to their failure to fulfill contracts, disputes/lawsuits or other legal disputes because they fail to meet or violate legal requirements in their daily activities.

Eight. Strategic risk

Strategic risk refers to the potential risk that improper development planning and strategic decision may threaten the future development of commercial banks in the process of systematic management in pursuit of short-term commercial goals and long-term development goals.