Very few things bring about the same level of schadenfreude in financial circles as a good financial collapse. The gossip on Bloomberg…the race to be the first one with the inside story… tutting at the poor risk management and obvious mistakes… speculating on outcome collapse, bail-out or who will ride in to save the day…and of course trying to make a quick profit picking up assets at fire-sale prices. That's as long as you're not exposed or at risk of contagion of course.

Markets have not left us wanting in recent years. We look at three collapses in three consecutive years. Three different institutions, three different customers bases. Different causes and different lessons.

  • A US bank that died of interest rate risk and concentration in 48 hours.
  • A globally systemic Swiss bank whose end taught bondholders about fine print.
  • A London-listed FX broker whose margin calls and risk appetite became its clients' problem inside a week.

The checklist the three cases write together

  • Aggregate exposure per name across deposits, hedge mark-to-market and operational balances.
  • Diversify to the point where any single failure is an inconvenience, not an event. Watch market signals, and act on divergence from ratings.
  • Know where you rank as a creditor in every exposure you hold, and remember different exposures to the same counterparty may be treated differently.
  • Ask every provider, bank or non-bank, how they manage their own risk, and treat a vague answer as data.
  • Have a back-up and rehearse the switch.

The same job at three sizes

Start-up. SVB was substantially a start-up story: single-bank concentration as the default setting of an entire ecosystem, corrected in one panicked weekend. … read more show less

There is now a standard solution, a second bank account, and money-market funds for large balances.

Established mid-market. Argentex is the mid-market's case: non-bank providers are often the best-value route for FX and payments, and diligence on their own risk management is the price of using them well. … read more show less

Ask the right questions, a good provider will answer them readily. Be cautious when credit terms or products seem too good to be true.

Large corporate. CS is the sophisticated case: complex instruments and structures carry risk that brand names obscure. … read more show less

The fine print on seniority was public all along; someone has to be paid to have read it.