Charles Schwab (SCHW), sitting on the crater of Silicon Valley banks, is facing another crisis.

As of March 15, Schwab clients withdrew $8.8 billion from its two Schwab Value Advantage Money Funds in three days, the largest outflow in six months, according to media data.

The two funds have combined assets of $195 billion, making them one of the largest prime money funds in the United States, and invest primarily in securities issued by financial institutions and non-financial companies. According to the fund's filings, it holds certificates of deposit with Deutsche Bank and Truist Bank, as well as commercial paper from Citigroup and Bank of America.

Charles Schwab's preferred funds have withstood the spike in interest rates, with daily and weekly liquidity levels higher than regulatory requirements, spokesman Mike Peterson said.

Under the impact of the collapse of Silicon Valley bank, Charles Schwab plunged more than 30% for three days, and its stock price was once as low as $47 on March 13, a two-year low.

Schwab's floating loss

Schwab is the largest brokerage firm in the United States and the eighth-largest bank by market capitalization, with assets of $551 billion and about 60% of its assets invested in securities portfolios. By the end of 2022, its client assets stood at $7.05 trillion, with 33.8 million active brokerage accounts.

Industry analysts pointed out that with the soaring interest rates, holding securities has become a key risk point. Total unrealised losses on HTM securities held by banks exceed $600bn, according to Barclays. And Charles Schwab's risk is naturally nearly three times higher than the bank average.

The size of Schwab's marketable financial assets (AFS) is 24 times tangible equity, 10 times larger than SVB, and the float loss is 10 billion more than SVB. Its float loss on financial assets to maturity (HTM) reached 2.35 times tangible equity, double that of SVB. That is, if SVB loses one of its own by dumping these holdings, it must lose at least two of its own.