RE:RE:RE:Clever accounting tricks used by SVB Silicon Valley was not permitted to hedge its "hold to maturity" MBS's using an interest rate swap agreement. Under accounting rules, they would be permitted to hedge as a credit default swap agreement. That is, the probability that the investment never makes it to maturity. Silicon Valley bank should have booked all of its MBS as an "available for sale" and then hedged the investment using an interest rate swap agreement. The losses they would have incurred on its mark to market MBS would have been offset by the gains on its interest rate swap agreement. That would have made sense.
Silicon Valley didn't hedge much on its MBS exposure and that was the nail in the coffin for them. The problem with SVB was that their depositor base was not diversified. They had many large clients as opposed to more smaller clients and they run a greater risk of a bank run problem.
Accounting rules on "hold to maturity" investments:
The notion of hedging the interest rate risk in a security classified as held to maturity is inconsistent with the held-to-maturity classification under ASC 320, which requires the reporting entity to hold the security until maturity regardless of changes in market interest rates. For this reason, ASC 815-20-25-43(c)(2) indicates that interest rate risk may not be the hedged risk in a fair value hedge of held-to-maturity debt securities.