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SVB-Eggs in one banking basket !!

Enough has and will be written about SVB, but a different perspective:

  1. Banking is complex and is a specialized function. What's even more complex is for outsiders to try and analyze what bank risk is all about. Only a tiny handful of people have those skills. That means that Joe Public's view of a bank is mostly guided by perception and gut feel. If you are truthful, you will admit that you really don’t know much more about a bank than what you are told.

  2. Bank rating are not generally freely available. It is usually well hidden on their websites and is often only available to Institutional investors. That is simply not good enough !!!

  3. If you accept that your insight or knowledge of a bank is mainly subjective, then it begs the question why depositors often leave all their funds with their favorite bank!. Seriously.

Based on the limited analysis, the most sensible option is diversification. It is one of the oldest and easiest risk mitigation options available. It proved itself during Covid and now again.

As a director, you have a responsibility to be acting in the best interest of stakeholders and having all your eggs in one banking basket certainly does not sound like risk management.

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