Banking
Silicon Valley Bank
Silicon Valley Bank was the bank of the tech industry, holding the cash of a huge share of US startups and venture funds. It parked that money in long-dated bonds just before interest rates soared, taking losses it could not absorb. When it admitted the hole, a coordinated run pulled $42 billion in a day, and regulators seized the second-largest bank failure in US history within 48 hours in March 2023.
- Company
- Silicon Valley Bank
- Started
- 1983
- Ended
- 2023
- Share of its $161B in deposits that were uninsured
- 93%
- Collapse speed
- Sudden
- Preventability
- High
- Lesson transfer
- Industry-wide
- Last reviewed
- 2026-07-24
Narrative
The story
The ambition
For four decades Silicon Valley Bank was the financial backbone of the technology industry. Founded in 1983, it made itself indispensable to startups and venture funds: the place where companies parked the money they raised, where partners kept personal accounts and mortgages, and where a large share of the entire venture-backed ecosystem banked. Being the bank for tech in a boom was a wonderful business. Its deposits swelled from around $60 billion in 2018 to nearly $190 billion by 2022 as venture money poured in, and SVB grew into one of the largest banks in the country, with roughly $209 billion in assets.
The rise
That growth was also SVB's undoing in the making. Flooded with deposits during the low-interest-rate boom, the bank invested a huge portion of the money in long-dated US government and mortgage-backed bonds, which looked safe and paid a little more than cash. On paper it was prudence. In practice it was a bet that interest rates would stay low.
The cracks
Rates did not stay low. As the Federal Reserve raised them sharply through 2022, the market value of SVB's long-dated bonds fell steeply, opening a large hole between what the bonds were worth and what SVB had paid. At the same time, its customers, cash-burning startups in a downturn, were drawing their deposits down rather than adding to them, so SVB needed liquidity precisely when its bonds were worth far less than it owed. On 8 March 2023 the bank tried to get ahead of it, disclosing that it had sold a $21 billion bond portfolio at a $1.8 billion loss and would raise $2.25 billion in fresh capital. The disclosure did the opposite of reassure.
The collapse
It confirmed the fear. SVB's deposit base was extraordinarily concentrated and flighty: more than 93% of its $161 billion in deposits sat above the $250,000 federal insurance limit, because startups and funds held enormous balances, and those depositors were tightly networked through their venture backers. When prominent investors told portfolio companies to pull their money, they did, instantly. On 9 March the stock crashed and depositors tried to withdraw about $42 billion in a single day, a run of unprecedented speed. On the morning of 10 March 2023 California regulators closed Silicon Valley Bank and handed it to the FDIC, the second-largest bank failure in US history and the biggest since 2008, roughly 48 hours from first tremor to seizure.
The aftermath
To stop the panic spreading, over the weekend federal regulators invoked a systemic-risk exception and guaranteed all SVB deposits, insured and uninsured, giving depositors access on Monday 13 March, while wiping out the bank's shareholders and unsecured bondholders. The episode became the defining bank failure of the social-media age: a run that moved at the speed of group chats and wire transfers, and a lesson in how a boring balance-sheet mistake, unhedged interest-rate risk, can kill a bank in two days.
The lessons
A bank can be destroyed by the assets it thought were safe. SVB did not make wild loans; it bought long-dated government bonds, and simply failed to protect itself against interest rates rising, on a deposit base that was unusually large, uninsured, and able to flee in unison. Concentration cuts both ways: being the bank for one booming industry brought the deposits and, when confidence turned, let them all leave at once. Manage the risk you think is dull, especially duration and depositor concentration, because in a networked world the gap between a rumor and a collapse can be a single afternoon.
Causal timeline
Failure Anatomy
- 2022
The bank for tech
Founded in 1983, Silicon Valley Bank became the financial backbone of the startup and venture ecosystem, its deposits swelling from about $60 billion in 2018 to nearly $190 billion by 2022 and roughly $209 billion in assets. [1]
- 2021
A bet on low rates
SVB invested a large share of its deposits in long-dated government and mortgage bonds during the low-rate boom, without hedging against rates rising. [2]
Incentive failure - 2022
The hole opens
As the Fed raised rates sharply through 2022, the value of SVB's long-dated bonds fell, opening a large loss just as cash-burning startups drew down deposits. [3]
External shockUnsustainable economics - 2023-03-08
The disclosure
On 8 March 2023 SVB disclosed it had sold a $21 billion bond portfolio at a $1.8 billion loss and would raise $2.25 billion in capital, alarming its depositors instead of reassuring them. [4]
Information failure - 2023-03-10
- 2023-03-12
The federal backstop
Over the weekend regulators guaranteed all deposits, insured and uninsured, under a systemic-risk exception, giving depositors access on 13 March while wiping out shareholders and unsecured bondholders. [8]
Structured analysis
What Went Wrong
Root causes
Unhedged interest-rate risk. SVB invested a huge share of deposits in long-dated bonds during low rates and failed to hedge against rates rising, so the Fed's 2022 hikes opened a large loss between the bonds' value and what it had paid. [2] [3]
A concentrated, flighty deposit base. More than 93% of SVB's $161 billion in deposits were uninsured (above the $250,000 limit) and held by tightly networked startups and funds, so the money could leave all at once. [5]
Contributing factors
Sharp interest-rate hikes. The Federal Reserve's rapid rate increases through 2022 drove down the value of SVB's long-dated bond holdings. [2]
Immediate trigger
The disclosure and the run. On 8 March 2023 SVB disclosed a $1.8 billion bond loss and a capital raise; within a day depositors pulled about $42 billion, and regulators seized the bank on 10 March. [4] [6]
Visible symptoms
A run of unprecedented speed. Depositors tried to withdraw about $42 billion in a single day, collapsing the bank within roughly 48 hours. [6]
Warning signs
Duration risk building on the balance sheet. SVB had accumulated large unrealized losses on long-dated bonds as rates rose, a hole visible before the run began. [2] [3]
Affected groups
Contested
Disputed points
Interpretations where credible accounts genuinely differ, presented as disputes, not settled facts.
Responsibility for the speed of the collapse is contested. Some observers blamed venture capitalists who urged their portfolio companies to pull deposits, arguing they triggered and accelerated the run, while others held that SVB's own mismanagement of interest-rate and concentration risk made it fragile and doomed regardless. Both factors are documented; the balance between them is debated. [2] [6]
MixedEvidence
Claims & sources
Every numbered marker in the analysis links to the claim it rests on, and each claim to its sources.
- [1]
Founded in 1983, Silicon Valley Bank became the dominant bank for US startups and venture funds, its deposits growing from about $60 billion in 2018 to nearly $190 billion by 2022, with roughly $209 billion in assets.
- [2]
SVB invested a large share of its deposits in long-dated government and mortgage-backed bonds during the low-rate boom without hedging, and their value fell sharply as the Federal Reserve raised interest rates through 2022.
- [3]
Rising rates opened a large loss between the market value of SVB's long-dated bonds and what it had paid, just as cash-burning startups were drawing down their deposits.
Moderate Reported explanation Investors Wiped Out As Bank Run Causes Collapse Of Silicon Valley Bank Silicon Valley Bank Collapses, FDIC Takes Control - [4]
On 8 March 2023 SVB disclosed it had sold a $21 billion bond portfolio at a $1.8 billion loss and would raise $2.25 billion in capital, which alarmed rather than reassured its depositors.
- [5]
More than 93% of SVB's $161 billion in deposits were above the $250,000 federal insurance limit, held by startups and funds with very large balances and tightly networked through their venture backers.
- [6]
On 9 March 2023 depositors tried to withdraw about $42 billion in a single day as VC-networked startups and funds fled, a bank run of unprecedented speed.
- [7]
On the morning of 10 March 2023 California regulators closed Silicon Valley Bank and handed it to the FDIC, the second-largest bank failure in US history and the biggest since 2008, roughly 48 hours after the first tremor.
- [8]
Over the weekend federal regulators guaranteed all SVB deposits, insured and uninsured, under a systemic-risk exception, giving depositors access on 13 March 2023 while wiping out the bank's shareholders and unsecured bondholders.
Sources
SVB: Here's a timeline of the bank's failure
TechCrunch · 2023-03-16
Daily Crunch: Silicon Valley Bank goes bust, regulators take control of $175B+ in deposits
TechCrunch · 2023-03-10
Investors Wiped Out As Bank Run Causes Collapse Of Silicon Valley Bank
Forbes · 2023-03-12
Silicon Valley Bank Collapses, FDIC Takes Control
Forbes · 2023-03-10
Why Deposit Insurance Didn't Help Silicon Valley Bank
Forbes · 2023-03-12