Lessons From the Silicon Valley Bank Crisis

Hinh T. Dinh

No 2312, Policy briefs on Economic Trends and Policies from Policy Center for the New South

Abstract: Silicon Valley Bank (SVB), the sixteenth largest bank in the United States, experienced a bank run in early March 2023, and was closed by the U.S. Federal Deposit Insurance Company (FDIC) on March 10. This bank failure, followed by others, creates fear of contagion throughout the U.S. and global banking systems. This Brief identifies four factors leading to the SVB crisis: i) Sharp interest rate increases by the Federal Reserve, which adversely affected SVB’s income and balance sheet; ii) The failure of SVB’s management to manage maturity mismatches; iii) The failure of the regulatory and supervisory agencies in discovering the problems and fixing them; and iv) The failure of the 2018 revised Dodd-Frank regulations to subject mid-size banks such as SVB to the same rigorous requirements that large banks have to meet, such as stress tests. The Brief also discusses lessons from the crisis.

Date: 2023-03
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