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From Hero to Zero: The case of Silicon Valley Bank

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  • Vo, Lai Van
  • Le, Huong Thi Thu

Abstract

This paper examines the factors contributing to the rapid collapse of Silicon Valley Bank, once regarded as one of the best banks. We show that the bank invested heavily in debt securities during a period of low interest rates, and the subsequent surge in interest rates in 2022 resulted in significant unrealized losses. Additionally, the bank's deposits were heavily concentrated among a small group of venture capitalists, which increased the likelihood of a bank run. Furthermore, the bank held less equity capital and had an inefficient risk management system, exacerbating the impact of the risk. Overall, the mismanagement of assets and liabilities led to the bank’s failure.

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  • Vo, Lai Van & Le, Huong Thi Thu, 2023. "From Hero to Zero: The case of Silicon Valley Bank," Journal of Economics and Business, Elsevier, vol. 127(C).
    • Handle: RePEc:eee:jebusi:v:127:y:2023:i:c:s0148619523000310
    DOI: 10.1016/j.jeconbus.2023.106138
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    More about this item

    Keywords

    Bank collapse; Bank failure; Debt securities; Risk management; Silicon Valley Bank; SVB;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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