[Alberta's Child]

Banks are not required to mark their reserves to market as long as the assets are designated as HTM ("hold to maturity") reserves. They could be listed on their balance sheets at face value no matter how much their market value declined in the meantime.

The problem for banks like SVB came when depositors began withdrawing huge sums of money. Once that happened, the bank was forced to sell billions of dollars worth of those HTM assets. Not only did this mean they had to sell them at a huge loss due to rising interest rates, but once they began selling off those HTM assets they were required (under banking regulations) to re-designate their entire portfolio of those bonds from HTM to AFS ("available for sale") assets -- at current market values.

[L,TOWM]

their “reserves”

There is your KEY WORD. Reserves are not assets. It was a big deal a few years ago when AAA municipal debt was declared “reserve eligible”.

The runs started after audit season and the larger depositers saw what was happening to ASSETS. Reserves were ok until the end.