Silicon Valley Bank Collapse: A Reminder of Banking Risks

Silicon Valley Bank (SVB) has gone down in history as the largest US bank failure since the 2008 Great Recession.[0] Founded in 1983, SVB had become deeply ingrained in the financial infrastructure of the tech industry, banking for nearly half of all venture-backed tech startups and many in the healthcare sector.[0] Last Friday, the Federal Deposit Insurance Corporation (FDIC) took control of SVB after a bank run and capital crisis.[1]

SVB specialized in catering to venture capital and private equity firms, so it experienced high growth as tech boomed over the past decade.[2] However, its depositor base was too concentrated in firms and employees from the venture capital realm, and when things got bad for its non-diversified group of clients, it very quickly got bad for the bank.[3]

The bank's collapse was precipitated by an announcement on March 8 that it had sold $21 billion of assets at a $1.8 billion loss and was going to sell $1.75 billion worth of shares to help plug that hole.[1] This spooked markets and clients, leading to massive withdrawals, which rendered the financial institution insolvent.[4]

The FDIC said it would retroactively protect all depositors at the two failed banks, not just smaller, insured, depositors.[5] The Federal Reserve and the Treasury Department also said that banks facing similar situations—having to sell Treasury securities to meet deposits—could instead borrow from the Fed.[5]

US President Joe Biden sought to reassure Americans that the banking system was sound, saying “Americans can have confidence that the banking system is safe. Your deposits are safe.”[6] However, many of SVB's depositors had more than $250,000 held at the bank, which is above the FDIC’s normal insurance guarantee in case of bank failure.[5]

The incident has sent shock waves across the tech sector, and it serves as a reminder of the risks associated with having a single industry make up the majority of a bank's deposits.[7] Despite assurances from the government that deposits are safe, uninsured US depositors do, in practice, lose money with some frequency.[4] Moving forward, it is essential to ensure that banks build solid and diversified portfolios and that depositors exercise caution when considering where to keep their hard-earned money.

0. “‘Lungs of the startup world’: bank fall upends most Silicon Valley industries” The Guardian, 15 Mar. 2023,

1. “Silicon Valley Bank's failure, the government's depositor rescue, and venture capitalists' incredible tantrum.” Slate, 13 Mar. 2023,

2. “What is Silicon Valley Bank? The bank’s collapse, explained.”, 14 Mar. 2023,

3. “Government fear-mongering over Silicon Valley Bank — and how to profit” New York Post , 15 Mar. 2023,

4. “The Silicon Valley Bank collapse couldn’t have happened in this one state”, 15 Mar. 2023,

5. “Silicon Valley Bank: Who's to Blame?” City Journal, 13 Mar. 2023,

6. “Why did Silicon Valley Bank fail and is a financial crisis next?” Al Jazeera English, 14 Mar. 2023,

7. “Opinion | The Boys Who Cried ‘Woke!’” The New York Times, 14 Mar. 2023,

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