Lessons after the Silicon Valley Bank Collapse

Published on March 28, 2023

A bank's role as an intermediary between savers who prefer liquid deposits and borrowers who prefer illiquid assets, means they have fragile capital structures. How should US bankers respond to the SVB banking turmoil in the short, medium, and long term?

As we all know by now, the US government has stepped in and taken possession of Silicon Valley Bank (SVB), a state-chartered commercial bank serving tech, life sciences, venture capital and start-up businesses in California. The bank’s failure is the largest since 2008 when Washington Mutual bank customers withdrew $16.7 billion (about 9% of deposits held) during a nine-day bank run. That was before Twitter, same-day fund transfers, and social media trolls.

In the case of SVB, customers initiated $42 billion in withdrawals in just a single day, leaving the bank with a negative cash balance of $1 billion at the close of…

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