Silicon Valley Bank

Silicon Valley Bank's March 2023 collapse was the second-largest bank failure in U.S. history and demonstrated how interest rate risk can kill a bank that appears healthy by traditional metrics. SVB had grown from $55 billion in 2019 to $209 billion in 2022, riding the tech startup boom. When interest rates rose, the music stopped. SVB's mechanism failure was duration mismatch in an extreme form. The bank took short-term deposits from tech startups and invested in long-dated Treasury bonds and mortgage-backed securities. When interest rates rose, those securities lost value—but so long as SVB held them to maturity, losses remained unrealized. The problem was SVB's depositor base. Tech startups burn cash; they don't add deposits. As venture capital funding dried up in 2022, SVB's customers withdrew deposits faster than the bank could meet redemptions without selling securities at a loss. The bank run that killed SVB was remarkable for its speed: $42 billion attempted withdrawals in 24 hours—the fastest bank run in history, enabled by mobile banking and social media coordination. Peter Thiel's Founders Fund advised companies to pull deposits; the signal cascaded through tech networks. SVB tried to raise capital but announced the attempt before it was complete, triggering panic rather than reassurance. The alarm signal meant to restore confidence accelerated collapse. SVB's failure demonstrated that regulatory frameworks designed for slower eras cannot handle Twitter-speed bank runs.