Did US hedge accounting rules contribute to SVB’s recklessness?

Hedging and directional risk-taking was a problem, but FASB regime may have complicated matters

Credit: Jeppe Gustafsson/Alamy/Risk.net montage/bit.ly/42SF5Uj

When Silicon Valley Bank’s deposit base nearly doubled in 2021 due to an influx of venture capital money, it had a big decision to make.

Having invested the cash in fixed rate bonds, SVB had to choose between classifying them as either held-to-maturity (HTM) or available-for-sale (AFS). HTM securities are carried on the balance sheet at amortised cost, while AFS holdings must be marked-to-market.

There was another factor to consider. Accounting standards at the time made it difficult to get

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here