Silicon Valley Bank's collapse

Silicon Valley Bank had grown rapidly during the tech-industry boom of the pandemic years by taking in a huge wave of deposits from startups and venture-capital firms, then investing much of that money in long-term government and mortgage-backed securities purchased when interest rates were near zero. As the Federal Reserve raised rates sharply through 2022 and 2023 to fight inflation, the market value of those long-dated bond holdings fell substantially, and the bank had not adequately hedged against that risk even as it removed some existing hedges. When SVB disclosed on March 8, 2023 that it had sold a large chunk of its available-for-sale securities at a $1.8 billion loss and needed to raise fresh capital, panic spread quickly through its concentrated, tech-heavy depositor base — many with uninsured balances well above the $250,000 FDIC insurance limit — and customers pulled roughly $42 billion, about a quarter of total deposits, in a single day. California regulators closed the bank on March 10, 2023, the second-largest bank failure in US history after Washington Mutual, and the FDIC took the unusual step of guaranteeing all deposits, insured and uninsured alike, to prevent the panic from spreading to other regional banks.