Mr. Wenning, you have been warning of an earthquake in California for a long time. But you didn’t mean that a bank would go bankrupt there.
No, especially since the collapse of Silicon Valley Bank was not a natural disaster, nothing inevitable. The basics of banking were violated there. Of course that can happen. Ideally, however, there is supervision. Not so in the US. There, only the twelve largest banks are declared as systemic. What happened there was avoidable.
Which error do you mean?
Banks receive deposits from customers. However, these do not always commit themselves in the long term, for example if they deposit their money in money market or giro accounts and thus keep them available at all times. If the bank puts that money in bonds that have 10 or 20 years to take advantage of higher interest rates, it runs the risk that its customers will want their money back before those 10 years are up. In this case, it has to sell the bonds again, resulting in high losses as a result of the interest rates that have risen in the meantime. To avoid this, the maturities of assets and liabilities must be better managed. For us insurers, this is also part of our daily bread. And if, as in the case of the failed institute, we let the maturities diverge with the aim of higher investment income, then we have to hedge this risk with sufficient equity. In Europe, this is the applicable regulation.