Maintaining Liquidity

By Vickey Li | March 29, 2023

Maintaining Liquidity: How Veery's Flexible Office Rentals Can Help

In light of the recent banking crisis, the importance of liquidity has become increasingly relevant. The collapse of Silicon Valley Bank (SVB) and Signature Bank had a significant impact on global financial markets and resulted in a collapse in investor and depositor confidence in other vulnerable banks. Fortunately, First Citizens Bank's purchase of SVB's remaining assets, deposits, and loans provides hope that the crisis may be easing. However, it still rains a bell for companies about their liquidity.

Firstly, it is crucial to understand what liquidity is and why it matters in banking. Liquidity refers to a bank's ability to meet its financial obligations, such as withdrawals or loan requests, without incurring significant losses. When a bank does not have enough liquid assets to meet its financial obligations, it may lead to a run on the bank, which can cause the bank to collapse. A run on a bank occurs when a large number of depositors withdraw their funds from the bank, which can quickly deplete the bank's liquidity.

In the case of SVB, the bank's collapse was caused by a drop in the value of US Treasuries, which it held when regulators took over. The fixed interest rates on these bonds were below market value, thanks to the Federal Reserve's policy of steadily raising interest rates over the last year. When SVB announced it had to sell about $21 billion of those Treasuries at a $1.8 billion after-tax loss to cover customers' withdrawals, it essentially sparked a run on the bank. Regulators shut SVB down after clients withdrew $42 billion in a single day, making it the second-largest bank failure in US history.

Veery, a flexible short-term office rental company, can provide value to companies looking to maintain their liquidity. One of the ways that companies can maintain their liquidity is by reducing their fixed expenses. Rent is often one of the most significant fixed expenses for businesses, and Veery can help companies reduce their rental costs by providing short-term office rentals. Companies can rent office space for a few months, which allows them to reduce their rental costs without incurring significant long-term commitments.

In conclusion, liquidity is a crucial aspect of banking, particularly in times of crisis. SVB's collapse highlights the importance of maintaining adequate liquidity to meet financial obligations. While banks need to strike a balance between holding enough liquid assets and maximizing profitability, companies can maintain their liquidity by reducing their fixed expenses. Veery can provide value to companies by offering flexible short-term office rentals that enable them to reduce their rental costs without incurring significant long-term commitments.

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