From Hero to Zero: The case of Silicon Valley Bank

Lai Van Vo and Huong Thi Thu Le

Journal of Economics and Business, 2023, vol. 127, issue C, No S0148619523000310

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.

Keywords: Bank collapse; Bank failure; Debt securities; Risk management; Silicon Valley Bank; SVB (search for similar items in EconPapers)
JEL-codes: G14 G21 G24 G28 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:127:y:2023:i:c:s0148619523000310

DOI: 10.1016/j.jeconbus.2023.106138

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