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Silicon Valley Bank collapse (2023)
March 2023· Crisis or event
Fact, law or dataA rule, statute, definition or measured number.
Silicon Valley Bank failed in March 2023 after a $42 billion run in one day, then the second-largest US bank failure.
See it on the Money & Finance map →How it works
SVB's deposits, mostly from tech startups and venture funds, roughly tripled in 2020–21 to about $189 billion. It parked much of the cash in long-term Treasuries and mortgage bonds at low yields. When rates rose in 2022, those bonds lost about $15 billion of value, nearly all its equity. On March 8, 2023, it announced a loss on a bond sale; venture firms told startups to pull money, and roughly 90% of deposits were uninsured. Regulators closed it on March 10.
Why it matters
It showed a bank can fail from interest-rate risk on 'safe' bonds, and that phone banking and social media make runs nearly instant. Regulators then guaranteed all its deposits.
Facts, rules and data
The Fed's April 2023 review led by Vice Chair Michael Barr, FDIC and GAO reports, SVB's 2022 annual report, and the California regulator's closing order.
Debates and risks
Whether protecting all deposits, even uninsured ones, set a precedent that effectively removes the $250,000 cap whenever a large bank fails is debated.
Connections (5)
▸The discount window: lender of last resort was tapped heavily during Silicon Valley Bank collapse (2023)Fact, law or data
The connection
When uninsured depositors fled, banks needed cash fast. In the week after SVB failed they borrowed a record of about $153 billion from the discount window, plus about $12 billion from the new Bank Term Funding Program, which lent against Treasuries at face value rather than their reduced market value.
When and why
Regional Reserve Banks, the week of March 13–15, 2023; borrowers included First Republic Bank, which still failed on May 1.
How we know
The Fed's weekly H.4.1 balance-sheet reports, and borrower-level data the Fed later released under Dodd-Frank disclosure rules.
Debates and risks
SVB itself was not set up to borrow quickly when the run hit. How to get banks to use the window before panic sets in is unresolved.
▸Janet Yellen, Fed chair and Treasury Secretary as Treasury Secretary backstopped depositors in Silicon Valley Bank collapse (2023)Fact, law or data
The connection
Two days after SVB closed, Yellen approved a 'systemic risk exception' on the FDIC's and Fed's recommendation, letting the FDIC protect all deposits at SVB and Signature Bank, including amounts over $250,000. That stopped the run from spreading to other regional banks. The cost was charged to banks through a special FDIC fee, not taxpayers.
When and why
Washington, Sunday, March 12, 2023, after consulting President Biden; announced jointly by Treasury, the Fed and the FDIC.
How we know
The joint statement of March 12, 2023, and the FDIC's special-assessment rule of November 2023.
Debates and risks
Days later Yellen told senators she was not considering a blanket guarantee of all US deposits, and regional bank stocks fell; which banks would get SVB's treatment remains unclear.
▸Silicon Valley Bank collapse (2023) was a digital-age case of Bank runs: when depositors all want out at onceFact, law or data
The connection
SVB's run followed the old script at new speed. Its depositors were a tight network of startups and venture firms. After the loss announcement, warnings spread on group chats and Twitter, and customers moved money by phone: $42 billion left in one day, about a quarter of deposits, with $100 billion more queued.
When and why
Santa Clara, California, March 9–10, 2023.
How we know
The Fed's April 2023 review and FDIC reports give the withdrawal figures; academic studies tied the outflows to Twitter activity.
Debates and risks
Whether deposit insurance and liquidity rules designed for slower runs can cope, and whether to insure all business payment accounts, are debated.
▸Why bond prices fall when yields rise explains the bond losses behind Silicon Valley Bank collapse (2023)Fact, law or data
The connection
SVB bought long-term bonds yielding under 2% in 2020–21. When the Fed raised rates in 2022, new bonds paid 4% or more, so SVB's older bonds lost market value, about $15 billion on those held to maturity. Accounting let it carry them at cost until it had to sell.
When and why
SVB's balance sheet, 2021–2023; the losses appeared in the footnotes of its 2022 annual report.
How we know
SVB's own filings and the Fed's review show the unrealized losses; the math is standard bond pricing.
Debates and risks
Why the bank and its supervisors ignored such plain interest-rate risk, and whether held-to-maturity accounting hides it, are debated.
▸USD Coin (USDC) and its issuer, Circle briefly lost its peg in Silicon Valley Bank collapse (2023)Fact, law or data
The connection
On March 10, 2023 Circle disclosed that $3.3 billion of its roughly $40 billion in USDC reserves was stuck at the failed Silicon Valley Bank. Holders rushed to sell, and USDC fell to about 87 cents. It recovered to $1 within days, once regulators guaranteed all SVB deposits.
When and why
March 10–13, 2023; Circle, SVB, the FDIC and crypto exchanges.
How we know
Circle's statements, market price data, and the joint Treasury, Fed and FDIC announcement of March 12, 2023.
Debates and risks
What would have happened without the government guarantee, since USDC holders themselves had no deposit insurance.