Before the bank run, Ripple’s CTO claimed that Silicon Valley Bank was already “insolvent”


CTO of FinTech company Ripple, David Schwartz, recently explained why he believes that Silicon Valley Bank (SVB), which was closed by Californian regulators last Friday (March 10) and is now under the control of the US Federal Deposit Insurance Corporation (FDIC), was “insolvent” before last week’s bank run.

89% of SVB’s $175 billion in deposits are uninsured. At its demise, SVB was the 16th-largest bank in the United States and the largest bank by deposits in Silicon Valley, home to some of the most prominent tech companies (including Ripple).

According to a Reuters article, the FDIC is “racing to find another bank ready to combine with Silicon Valley Bank by the weekend,” according to individuals familiar with the situation who sought anonymity because the specifics are classified.

SVB’s failure prompted Circle’s stablecoin USD Coin ($USDC) to lose its USD peg, falling to as low as $0.8102 on certain exchanges (such as Bitstamp) yesterday.

Curiously, SVB announced on March 6 that it had made Forbes’ annual list of America’s Best Banks for the fifth consecutive year:

Delighted to be included on @Forbes’ annual ranking of America’s Best Banks for the fifth consecutive year and the publication’s debut list of Financial All-Stars.

“I still do not get how a bank run might lead to its insolvency. If the bank was solvent before, its assets surpass its liabilities. The run has no effect on either the assets or the liabilities, so how can the liabilities suddenly outweigh the assets?…When determining whether or not a business is solvent, it is necessary to account for any encumbrances on its assets… They were bankrupt. They simply did not mark their long-term Treasury holdings to market. They would have likely been solvent once their 10-year treasuries matured. But, they did not get the chance owing to a run.”

Mark to Market (MTM) “seeks to offer a realistic estimate of an institution’s or company’s present financial state based on current market circumstances,” as Investopedia defines.

Also Read: Henrik Zeberg Predicts Worse Market Crash Since 1929

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