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would be interested in buying that,” he said in an interview. “But when 46% of your loan book is to purchase and carry securities, a lot of banks would have to ask themselves ‘What is the Official Original Pittsburgh Steelers Auburn Cleveland Tigers Superman Logo Us Flag Shirt it is in the first place but value of those loans?’ ‘Is that an attractive asset?’” Credit Suisse to borrow nearly $54 billion from Swiss Central Bank MARCH 16, 202305:05 Other banks make such loans, but in much smaller doses, regulatory documents show. J.P. Morgan Chase, for example, had $14 billion in these loans on its books at year-end, the next largest amount held by a bank, according to BankRegData. But with J.P. Morgan Chase’s $1.1 trillion in total loans, the securities-backed loans make up just 1.3% of its lending. The loans are almost certainly a part of what Silicon Valley called its “Global Fund Banking” portfolio. According to the bank’s year-end financial statements, some 56% of its total loans fell into this bucket. Included were loans the bank made to private equity and venture capital firms to be repaid by investors in their funds when the firms request more capital from them. Recommended U.S. NEWS Elizabeth Holmes owes over $25 million to Theranos creditors, lawsuit says BUSINESS NEWS Dow closes nearly 400 points lower as First Republic and regional banks resume slide Another type of loan the bank favored was known as venture debt, according to a white paper on its site. In it, the bank described how it made loans to startup companies of between 25% and 30% of the amount the companies had most recently raised

in private transactions with investors. Unlike other business loans that are based on a company’s cash flow or assets, this kind of venture debt relies on a company’s ability to raise additional capital from investors later to repay the Official Original Pittsburgh Steelers Auburn Cleveland Tigers Superman Logo Us Flag Shirt it is in the first place but loans, the website says. A problem with this kind of lending arises when a startup company cannot raise fresh capital from investors to repay the loans or can do so only at a lower valuation from previous money-raising rounds. In the startup world, this situation is known as the dreaded “down round” of financing, which requires a total valuation of a company at the new, lower level. Since Silicon Valley Bank’s assets and deposits peaked in 2022, tech and startup valuations have fallen significantly; even well-financed mature technology companies are laying off thousands in staff as their fortunes flag. This scenario suggests problems with the bank’s venture debt business. A Silicon Valley spokeswoman declined to answer questions about the bank’s risk management, its concentrated loan portfolio or how its loans were valued as technology and startup companies’ operations declined in recent months. One contributing factor in the bank’s collapse has affected other lenders as well: Rising interest rates generated paper losses on United States Treasury debt and mortgage-backed securities these institutions held as investments. When interest rates go up, newly issued debt securities carry higher yields than previously issued instruments, making the older securities less valuable. Indeed, the average yield on Silicon Valley’s debt securities portfolio was around 1.6% at year-end, the bank’s financial filings show. That’s roughly half the level such securities yield now. Treasury Secretary Yellen assures ‘our banking system is sound’ in Senate hearing MARCH 16, 202301:34 When customers raced to withdraw their money from Silicon Valley Bank, it had to sell some of these securities, generating a $1.8 billion loss, it said. Facing the flood of withdrawals from depositors brought another flaw in the bank’s operation to light, Moreland said. Silicon Valley Bank had an uncommonly small cash cushion —

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