On March 17, 2023, Silicon Valley Bank collapsed after a two-day bank run starting on March 8th, becoming the second-largest bank failure in U.S. history.[0] SVB had emerged as the bank to go-to for tech startups and venture capital firms, but its downfall was caused by three main factors.[1] Firstly, SVB had a high percentage of large deposits that were not covered by FDIC deposit insurance. Secondly, the bank had become overly reliant on low-cost financing from a federal home-loan bank, and lastly, the bank had no chief risk officer for eight months in 2020, the year of the crypto crisis and tech meltdown.[2]
This bank run triggered a liquidity crisis among smaller, regional banks, and led to the U.S. Treasury, Federal Reserve, and FDIC’s coordinated Sunday night liquidity backstop. This backstop, in the form of one-year loans to eligible depository institutions, was made possible by the Bank Term Funding Program (BTFP).[3]
For depositors of SVB and other affected banks, it is important to know that the FDIC insures deposits up to $250,000.[3] Those with deposits beyond the limit may be out of luck, and should take caution with any banking transactions.
0. “March 2023 Newsletter: A Look at Bank Solvency” Lyn Alden, 13 Mar. 2023, https://www.lynalden.com/march-2023-newsletter/
1. “How does a bank collapse in 48 hours? A timeline of the SVB fall” CNN, 13 Mar. 2023, https://www.cnn.com/2023/03/11/business/svb-bank-collapse-explainer-timeline/index.html
2. “We Know Who’s to Blame for the Silicon Valley Bank Failure” The Atlantic, 16 Mar. 2023, https://www.theatlantic.com/ideas/archive/2023/03/svb-collapse-fed-regulation-financial-system-safety/673401
3. “A bailout or not? Did the federal government bailout Silicon Valley Bank and Signature Bank?” ABC News, 16 Mar. 2023, https://abcnews.go.com/Business/bailout-federal-government-bailout-silicon-valley-bank-signature/story?id=97846142