{"id":2615,"date":"2023-03-19T06:03:01","date_gmt":"2023-03-19T11:03:01","guid":{"rendered":"https:\/\/embarrdowns.com\/silicon-valley-bank-collapse-a-reminder-of-banking-system-vulnerability\/"},"modified":"2023-03-19T06:03:01","modified_gmt":"2023-03-19T11:03:01","slug":"silicon-valley-bank-collapse-a-reminder-of-banking-system-vulnerability","status":"publish","type":"post","link":"https:\/\/embarrdowns.com\/silicon-valley-bank-collapse-a-reminder-of-banking-system-vulnerability\/","title":{"rendered":"\u201cSilicon Valley Bank Collapse a Reminder of Banking System Vulnerability\u201d"},"content":{"rendered":"

Silicon Valley Bank (SVB), one of the top 20 American commercial banks with $209 billion in total assets at the end of last year, collapsed on Friday morning after it failed to raise enough capital to cover its losses.[0]<\/a><\/sup> According to the Federal Deposit Insurance Corporation (FDIC), SVB had $209 billion in assets and $175.4 billion in deposits at the time of failure, with more than half of its loans going to venture and private equity firms.[1]<\/a><\/sup> The FDIC quickly took control of the bank and set up another bank where depositors could access their money.<\/p>\n

The collapse of SVB, the 16th largest bank in the U.S. by assets, came after it announced on March 8 that it had sold $21 billion of assets at a $1.8 billion loss and would sell $1.75 billion worth of shares to plug that hole.[2]<\/a><\/sup> The news triggered a panic among key venture capital firms, who reportedly advised companies to withdraw their money from the bank.[3]<\/a><\/sup> The next night, depositors tried to withdraw $42 billion, making the bank insolvent.[2]<\/a><\/sup><\/p>\n

Experts say the failure of SVB was due to large unrealized losses on government securities, which became a problem when the Federal Reserve raised interest rates and the value of securities dropped. SVB had an atypically large number of uninsured deposits, particularly large accounts over $250,000, which demonstrated its popularity among tech elites.[4]<\/a><\/sup> The bank also had a \u201chyper reliance on uninsured deposits,\u201d which can make a bank inherently less stable since uninsured depositors are more likely to withdraw their money.[5]<\/a><\/sup><\/p>\n

The FDIC\u2019s standard insurance covers up to $250,000 per depositor, per bank, for every account ownership category.[6]<\/a><\/sup> However, at any given time, the FDIC only has about 1% of bank deposits\u2019 worth of insurance in their fund.[7]<\/a><\/sup> Furthermore, in 2018, a bipartisan group of legislators gutted parts of Dodd-Frank, the regulatory-reform law passed after the 2008 financial crisis, and exempted midsize banks like SVB from certain stress tests and capital requirements.[8]<\/a><\/sup><\/p>\n

The collapse of SVB is a reminder that the banking system is still vulnerable to sudden banking runs and capital crises, even if the big banks are in better financial shape than small ones.<\/p>\n

0. <\/span>“Silicon Valley Bank collapse and other key moments in the week that rocked banks” NPR, 17 Mar. 2023, https:\/\/www.npr.org\/2023\/03\/17\/1163911866\/5-big-moments-from-the-week-that-rocked-the-banking-system<\/a><\/a><\/p>\n

1. <\/span>“The collapse of Silicon Valley Bank, explained visually” USA TODAY, 14 Mar. 2023, https:\/\/www.usatoday.com\/story\/graphics\/2023\/03\/13\/graphics-bank-collapse-silicon-valley\/11466073002\/<\/a><\/a><\/p>\n

2. <\/span>“Silicon Valley Bank’s failure, the government’s depositor rescue, and venture capitalists’ incredible tantrum.” Slate, 13 Mar. 2023, https:\/\/slate.com\/technology\/2023\/03\/silicon-valley-bank-rescue-venture-capital-calacanis-sacks-ackman-tantrum.html<\/a><\/a><\/p>\n

3. <\/span>“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<\/a><\/a><\/p>\n

4. <\/span>“New scrutiny of bank regulators after SVB collapse” The Washington Post, 17 Mar. 2023, https:\/\/www.washingtonpost.com\/business\/2023\/03\/17\/bank-regulation-svb-collapse\/<\/a><\/a><\/p>\n

5. <\/span>“Opinion | The Boys Who Cried \u2018Woke!\u2019” The New York Times, 14 Mar. 2023, https:\/\/www.nytimes.com\/2023\/03\/14\/opinion\/silicon-valley-bank-republicans-woke.html<\/a><\/a><\/p>\n

6. <\/span>“FDIC insurance: Here’s how certain bank deposits are backed by the government” Yahoo News, 13 Mar. 2023, https:\/\/news.yahoo.com\/fdic-insurance-heres-how-certain-bank-deposits-are-backed-by-the-government-180015108.html<\/a><\/a><\/p>\n

7. <\/span>“March 2023 Newsletter: A Look at Bank Solvency” Lyn Alden, 13 Mar. 2023, https:\/\/www.lynalden.com\/march-2023-newsletter\/<\/a><\/a><\/p>\n

8. <\/span>“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<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Silicon Valley Bank (SVB), one of the top 20 American commercial banks with $209 billion in total assets at the end of last year, collapsed on Friday morning after it failed to raise enough capital to cover its losses.[0]<\/a><\/sup> According to the Federal Deposit Insurance Corporation (FDIC), SVB had $209 billion in assets and $175.4 billion in deposits at the time of failure, with more than half of its loans going to venture and private equity firms.[1]<\/a><\/sup> The FDIC quickly took control of the bank and set up another bank where depositors could access their money.<\/p>\n

The collapse of SVB, the 16th largest bank in the U.S. by assets, came after it announced on March 8 that it had sold $21 billion of assets at a $1.8 billion loss and would sell $1.75 billion worth of shares to plug that hole.[2]<\/a><\/sup> The news triggered a panic among key venture capital firms, who reportedly advised companies to withdraw their money from the bank.[3]<\/a><\/sup> The next night, depositors tried to withdraw $42 billion, making the bank insolvent.[2]<\/a><\/sup><\/p>\n

Experts say the failure of SVB was due to large unrealized losses on government securities, which became a problem when the Federal Reserve raised interest rates and the value of securities dropped. SVB had an atypically large number of uninsured deposits, particularly large accounts over $250,000, which demonstrated its popularity among tech elites.[4]<\/a><\/sup> The bank also had a \u201chyper reliance on uninsured deposits,\u201d which can make a bank inherently less stable since uninsured depositors are more likely to withdraw their money.[5]<\/a><\/sup><\/p>\n

The FDIC\u2019s standard insurance covers up to $250,000 per depositor, per bank, for every account ownership category.[6]<\/a><\/sup> However, at any given time, the FDIC only has about 1% of bank deposits\u2019 worth of insurance in their fund.[7]<\/a><\/sup> Furthermore, in 2018, a bipartisan group of legislators gutted parts of Dodd-Frank, the regulatory-reform law passed after the 2008 financial crisis, and exempted midsize banks like SVB from certain stress tests and capital requirements.[8]<\/a><\/sup><\/p>\n

The collapse of SVB is a reminder that the banking system is still vulnerable to sudden banking runs and capital crises, even if the big banks are in better financial shape than small ones.<\/p>\n

0. <\/span>“Silicon Valley Bank collapse and other key moments in the week that rocked banks” NPR, 17 Mar. 2023, https:\/\/www.npr.org\/2023\/03\/17\/1163911866\/5-big-moments-from-the-week-that-rocked-the-banking-system<\/a><\/a><\/p>\n

1. <\/span>“The collapse of Silicon Valley Bank, explained visually” USA TODAY, 14 Mar. 2023, https:\/\/www.usatoday.com\/story\/graphics\/2023\/03\/13\/graphics-bank-collapse-silicon-valley\/11466073002\/<\/a><\/a><\/p>\n

2. <\/span>“Silicon Valley Bank’s failure, the government’s depositor rescue, and venture capitalists’ incredible tantrum.” Slate, 13 Mar. 2023, https:\/\/slate.com\/technology\/2023\/03\/silicon-valley-bank-rescue-venture-capital-calacanis-sacks-ackman-tantrum.html<\/a><\/a><\/p>\n

3. <\/span>“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<\/a><\/a><\/p>\n

4. <\/span>“New scrutiny of bank regulators after SVB collapse” The Washington Post, 17 Mar. 2023, https:\/\/www.washingtonpost.com\/business\/2023\/03\/17\/bank-regulation-svb-collapse\/<\/a><\/a><\/p>\n

5. <\/span>“Opinion | The Boys Who Cried \u2018Woke!\u2019” The New York Times, 14 Mar. 2023, https:\/\/www.nytimes.com\/2023\/03\/14\/opinion\/silicon-valley-bank-republicans-woke.html<\/a><\/a><\/p>\n

6. <\/span>“FDIC insurance: Here’s how certain bank deposits are backed by the government” Yahoo News, 13 Mar. 2023, https:\/\/news.yahoo.com\/fdic-insurance-heres-how-certain-bank-deposits-are-backed-by-the-government-180015108.html<\/a><\/a><\/p>\n

7. <\/span>“March 2023 Newsletter: A Look at Bank Solvency” Lyn Alden, 13 Mar. 2023, https:\/\/www.lynalden.com\/march-2023-newsletter\/<\/a><\/a><\/p>\n

8. <\/span>“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<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":2614,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2615"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=2615"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/2615\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/2614"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=2615"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=2615"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=2615"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}