Collapse of Silicon Valley Bank

On March 10, 2023, Silicon Valley Bank (SVB) failed after a bank run, marking the third-largest bank failure in United States history and the largest since the 2007–2008 financial crisis. It was one of three bank failures, along with Silvergate Bank and Signature Bank, in March 2023 in the United States. Seeking higher investment returns from its burgeoning deposits, SVB had dramatically increased its holdings of long-term securities since 2021, accounting for them on a hold-to-maturity basis. The market value of these bonds decreased significantly through 2022 and into 2023 as the Federal Reserve raised interest rates to curb an inflation surge, causing unrealized losses on the portfolio. Higher interest rates also raised borrowing costs throughout the economy and some Silicon Valley Bank clients started pulling money out to meet their liquidity needs. To raise cash to pay withdrawals by its depositors, SVB announced on Wednesday, March 8 that it had sold over US$21 billion worth of securities, borrowed $15 billion, and would hold an emergency sale of some of its treasury stock to raise $2.25 billion. The announcement, coupled with warnings from prominent Silicon Valley investors, caused a bank run as customers withdrew funds totaling $42 billion by the following day. On the morning of March 10, the California Department of Financial Protection and Innovation seized SVB and placed it under the receivership of the Federal Deposit Insurance Corporation (FDIC). An additional $100 billion were expected to be withdrawn during Friday. About 89 percent of the bank's $172 billion in deposit liabilities exceeded the maximum insured by the FDIC. Two days after the failure, the FDIC received exceptional authority from the Treasury and announced jointly with other agencies that all depositors would have full access to their funds the next morning. Seeking to auction off all or parts of the bank, the FDIC reopened it on Monday March 13 as a newly organized bridge bank, Silicon Valley Bridge Bank, N.A. Although some characterized the government response as a bailout, the plan did not entail rescuing the bank, its management or shareholders, but rather making uninsured depositors whole from the proceeds of selling the bank's assets, without the use of taxpayer money. The collapse of SVB had significant consequences for startup companies in the U.S. and abroad, with many briefly unable to withdraw money from the bank. Other large technology companies, media companies, and wineries were also affected. For a number of founders and their venture capital backers, this was the bank of choice.