
Silicon Valley Bank was founded in 1983 by Robert Baldwin and Bill Biggerstaff in Santa Clara, California.
The bank quickly gained a reputation for serving the financial needs of the tech industry, and by the mid-1990s, it had established itself as a leading provider of financial services to startups and venture-backed companies.
SVB's expertise in the tech space allowed it to offer tailored banking services that met the unique needs of its clients, including cash management, investment banking, and international banking.
Causes of Collapse
The Federal Reserve formally attributed blame for Silicon Valley Bank's failure to its senior management team for mismanaging the investment risk of their balance sheet as well as the board of directors for not performing its duty as a check on senior management.
The bank's senior management team failed to fix six citations issued by the Fed and was placed under a full supervisory review in July 2022.
The bank's flawed models led its officers to incorrectly believe that rising interest rates would increase the bank's interest revenue to substantially stabilize its financial condition.
Moody's Investors Service reportedly informed SVB Financial, the bank's holding company, that it was facing a potential double-downgrade of its credit rating because of its unrealized losses.
SVB's customers, many of whom are in the technology industry, hit financial troubles and began to withdraw funds from their accounts, leading to a large withdrawal of deposits.
The bank's decision to sell some of its investments came at a loss, resulting in a $1.8 billion loss.
The 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act, signed into law by President Donald Trump, significantly changed the requirement for banks with more than $50 billion in assets, making Silicon Valley Bank less subject to oversight and rules.
The bank's CEO, Greg Becker, sold 12,451 shares of company stock worth $3.6 million just days before the bank's collapse, raising questions about insider trading.
SVB's Business and Operations
Silicon Valley Bank's business model focused on serving businesses and individuals in the tech, life science, and premium wine industries. The bank's client base was heavily concentrated in venture capital-backed and early-stage start-up firms.
The bank's loan portfolio was dominated by loans to venture capital firms and private equity firms, with 56% of its loans secured by limited partner commitments. In contrast, only 14% of its loans were mortgages to high-net-worth individuals.
SVB's underlying profit model was based on a "high interest margin" strategy, which contributed to the bank's collapse. The bank's high-risk strategy was also evident in its diversification into the high-risk real estate loan business in the early 1990s, which accounted for 50% of its portfolio.
Here's a breakdown of the bank's financials over the years:
SVB's parent company, SVB Financial Group, also launched sister subsidiaries to provide investment banking and private banking services in various countries, including Canada, China, and the UK.
Expansion
Silicon Valley Bank's expansion was fueled by the wave of computer technology startups during the dot-com bubble. The bank's willingness to lend to venture-stage companies that were not yet profitable made it a go-to destination for these businesses.
Among its approximately 2,000 clients in 1995 were networking innovators Cisco Systems and Bay Networks. The bank's headquarters was relocated from San Jose to Santa Clara that same year.
The bank continued to add branches in technology hubs across the country, solidifying its position as a leader in the industry. By 2002, SVB formally entered the private banking business.
In 2003, the bank sponsored high-profile international trade missions to Bangalore and Mumbai, Tel Aviv, and Shanghai and Beijing. It announced an international expansion drive in 2004, with new operations in Bangalore, London, Beijing, and Israel.
SVB received a $235 million investment from the federal government in exchange for preferred stock and warrants under the Troubled Asset Relief Program (TARP) during the 2007–2008 financial crisis.
Business Model
SVB's business model was heavily concentrated in serving venture capital-backed and early-stage start-up firms, with an emphasis on emerging entrepreneurs and investors. This focus on high-growth industries made the bank a go-to institution for start-ups in India.
The bank's loan portfolio was dominated by loans to venture capital firms and private equity firms, with 56% of its loans secured by limited partner commitments and used to make investments in private companies. In contrast, only 14% of its loans were mortgages to high-net-worth individuals.
SVB's high interest margin strategy was based on credit support for VC firms in need of liquidity, which contributed to the bank's collapse, according to Fortune in October 2024. This strategy allowed the bank to generate significant returns, but also exposed it to significant risks.
Here's a breakdown of the bank's loan portfolio in 2022:
The bank's exclusive relationship with its borrowers required them to maintain a relationship with the bank, which may have contributed to its concentration risk. This business model allowed SVB to generate significant revenue and profits, but also exposed it to significant risks.
Affiliations and Community Involvement
Silicon Valley Bank was a member of the Federal Reserve System, with the bank's CEO serving as a class A member of the Federal Reserve Bank of San Francisco Board of Directors.
The bank was also a member of several trade associations, including TechNet, the Silicon Valley Leadership Group, the Bay Area Council, Tech:NYC, the Mid-Size Bank Coalition of America, and the American Bankers Association.
In its foray into India, Silicon Valley Bank partnered with the non-profit mentoring organization TiE beginning in the late 1990s.
The bank founded the nonprofit Silicon Valley Bank Foundation in 1995 to operate its corporate citizenship programs, which were funded entirely through the bank, receiving contributions totaling $100,000 in 1998.
Silicon Valley Bank sponsored EF Education–Tibco–SVB, a women's professional cycling team, beginning in 2007, becoming a co-title sponsor in 2015.
The bank made more than $2 billion in loans and investments to developers, including $1.6 billion in loans since 2014, to build affordable housing in Silicon Valley and San Francisco, as well as Massachusetts.
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Collapse and Aftermath
The collapse of Silicon Valley Bank was a rapid and intense process. Here's a brief overview of the key events that led to its downfall.
The bank's troubles began on March 8, when it announced a $1.8 billion loss on its bond portfolio and plans to sell stock to raise $2.25 billion. This news sent shockwaves through the market, causing Moody's to downgrade the bank's ratings.
The stock price of SVB Financial Group, the bank's holding company, plummeted on March 9, with other major banks also experiencing a hit to their stock prices. This was followed by a massive withdrawal of funds, with customers attempting to withdraw $42 billion.
Trading was halted for SVB Financial Group stock on March 10, and the federal regulators took control of the bank. Deposits were moved to a bridge bank created by the FDIC, with a promise that insured deposits would be available by March 13.
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Here's a timeline of the key events leading up to the collapse:
- March 8: Silicon Valley Bank announces a $1.8 billion loss and plans to sell stock
- March 9: SVB Financial Group's stock price crashes, with other major banks experiencing a hit
- March 10: Trading is halted, and the federal regulators take control of the bank
- March 12: Emergency measures are announced to allow customers to recover all funds
- March 17: SVB Financial Group files for bankruptcy
- March 26: First Citizens Bank buys Silicon Valley Bridge Bank
HSBC Holdings Plc also stepped in, announcing on March 13 that it would buy the U.K. arm of Silicon Valley Bank for 1 pound.
Collapse
The collapse of Silicon Valley Bank happened rapidly over just a couple of days. Here's a brief timeline of the events that led to its downfall.
The bank announced its $1.8 billion loss on its bond portfolio on March 8, along with plans to sell both common and preferred stock to raise $2.25 billion. This move led to a downgrade of the bank's ratings by Moody's.
The stock for Silicon Valley Bank's holding company, SVB Financial Group, crashed at the market opening on March 9, with other major banks also seeing their stock prices take a hit. Customers began withdrawing their money, with a total of $42 billion attempted in withdrawals.
Trading was halted for SVB Financial Group stock on March 10, and before the bank could open for the day, federal regulators announced they would take it over. The regulators were unable to find a buyer for the bank, so deposits were moved to a bridge bank created and operated by the FDIC.
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Federal regulators announced emergency measures on March 12, allowing customers to recover all funds, including those that were uninsured. This move helped to stabilize the situation and prevent further panic.
The collapse of Silicon Valley Bank was a dramatic and swift event. Here's a summary of the key dates:
- March 8: Silicon Valley Bank announces its $1.8 billion loss and plans to sell stock.
- March 9: SVB Financial Group stock crashes, and customers begin withdrawing money.
- March 10: Trading is halted for SVB Financial Group stock, and regulators take over the bank.
- March 12: Regulators announce emergency measures to allow customers to recover all funds.
- March 17: Silicon Valley Bank's parent company, SVB Financial Group, files for bankruptcy.
- March 26: First Citizens Bank buys Silicon Valley Bridge Bank, except for $90 billion of securities and other assets.
HSBC Holdings Plc bought the U.K. arm of Silicon Valley Bank on March 13 for 1 pound.
Customers
The collapse of the system had a devastating impact on customers. Many were left without access to essential services and products.
In some areas, customers were forced to wait in long lines for hours just to purchase basic necessities. This was particularly true for those living in remote or rural areas.
The lack of communication from businesses and government agencies only added to the frustration. Customers were left in the dark about the status of services and when they might be restored.
As a result, many customers turned to alternative sources for their needs, such as bartering or online marketplaces. This shift in behavior was a clear indication of the desperation that had set in.
In some cases, customers were even forced to travel long distances to access basic services, further straining an already overwhelmed system.
Financial Impact
The financial impact of Silicon Valley Bank's collapse was significant, with market capitalization of U.S. banks losing a combined $100 billion in two days. European banks lost $50 billion.
Many depositors held more than $250,000 in their accounts, meaning most of their funds were uninsured. The FDIC's insurance only covers up to $250,000 per depositor per bank for each account category.
The bank's collapse also caused losses for investors, including shareholders and unsecured debt holders. They may not get their money back, unlike depositors who are being made whole.
Losses
The bank had a $117 billion bond portfolio at the end of 2022, with $91.3 billion held-to-maturity and $26 billion available-for-sale.
Its marked-to-market unrealized losses for securities held to maturity exceeded $15 billion at that time.
The bank didn't hedge against interest rate risk on its held-to-maturity portfolio, as most banks do not, because the hedge itself would bounce around with the market.
It did, however, hedge against interest rate risk on its available-for-sale portfolio by building up a $15.2 billion portfolio of interest rate swaps by the end of 2021.
During the first half of 2022, the bank realized $517 million in gains by unwinding $11 billion of its interest rate swaps on its available-for-sale bond portfolio.
By the end of the year, it had only $563 million in swaps protecting that portfolio.
In early 2023, the bank sold all of its available-for-sale securities, realizing a $1.8 billion loss.
Impact on Depositors and Investors
The FDIC insures bank deposits of up to $250,000 per depositor per bank for each account category. This means that if you had $250,000 in a Silicon Valley Bank account, you would get all of your money back.
Most accounts in Silicon Valley Bank held more than $250,000 of deposits, leaving account holders vulnerable to losses. Unfortunately, this meant that account holders would lose any money above the $250,000 threshold.
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To help, the Federal Reserve announced a systemic risk exception, ensuring that all depositors would be made whole, even for those funds that were uninsured. This was a crucial move to prevent further financial instability.
Investors, however, were not so lucky. The FDIC can protect depositors from losses, but it can't do the same for shareholders and unsecured debt holders. This means that individuals and institutions that owned stock in SVB Financial Group may not get their money back.
Government and Legal Response
The government and regulators quickly sprang into action following the collapse of Silicon Valley Bank. The Federal Reserve Board of Governors released a postmortem investigation into supervision and regulation of the bank, focusing on lax oversight during the tenure of Randal Quarles.
The U.S. Securities and Exchange Commission and U.S. Department of Justice have opened investigations into the bank's financial disclosures and executives' recent trading plans. A shareholder filed a Securities Class Action against the company, alleging fraud for false statements made by executives and the bank.
Senator Elizabeth Warren introduced legislation to roll back some provisions of the EGRRCPA, including regular stress testing. The Senate Committee on Banking, Housing, and Urban Affairs held a hearing on the bank failures, focusing on the Federal Reserve's oversight of banks.
Government Intervention Debate
The government's intervention in the Silicon Valley Bank (SVB) collapse was a hotly debated topic.
A group of 599 venture capitalists, including Garry Tan and David O. Sacks, along with hedge fund manager Bill Ackman and California State Senator Scott Wiener, called for a government intervention to protect uninsured depositors.
Representatives Ruben Gallego of Arizona and Eric Swalwell of California called for depositors to be made whole, while Representatives Ro Khanna and Brad Sherman of California called on the Treasury Department and FDIC to affirm that depositors would be protected so they could make payroll.
Representative Matt Gaetz of Florida and Republican presidential candidates Nikki Haley and Vivek Ramaswamy expressed opposition to any taxpayer-funded bailout of the bank.
San Jose Mayor Matt Mahan also called the $250,000 deposit insurance limit "arcane".
Governor Newsom, Senator Kyrsten Sinema of Arizona, and Representative Anna Eshoo of California applauded the FDIC's announcement that it would protect depositors without affecting taxpayers via the Bank Term Funding Program.
The FDIC's decision to invoke a systemic risk exception meant that all depositors, including those with uninsured funds, would be made whole.
Legal Actions

The government and regulatory bodies have taken significant steps in response to the Silicon Valley Bank (SVB) collapse.
The Federal Reserve Board of Governors released a postmortem investigation into the supervision and regulation of SVB, highlighting lax oversight during the tenure of former Vice Chair Randal Quarles.
The U.S. Securities and Exchange Commission and U.S. Department of Justice have reportedly opened investigations into the bank's financial disclosures and executives' recent trading plans.
A Securities Class Action lawsuit was filed against SVB in the U.S. District Court for the Northern District of California, alleging fraud for false statements made by executives and the bank.
Senator Elizabeth Warren introduced legislation to roll back some provisions of the EGRRCPA, including regular stress testing, and was cosponsored by around 50 Democrats in the Senate and House of Representatives.
The Senate Committee on Banking, Housing, and Urban Affairs held a hearing on March 28 to discuss the Federal Reserve's oversight of banks, but former CEO Gregory W. Becker did not attend.
Financial System and Ownership
Silicon Valley Bank's financial system was rocked by its sudden collapse, causing a ripple effect across the banking sector. Market capitalization of U.S. banks lost a combined $100 billion in two days, with European banks losing $50 billion.
The bank's losses highlighted the challenge that banks face as interest rate increases reduce the market value of bonds they purchased under low-rate policies. Several banks, such as First Republic Bank and Western Alliance Bancorporation, issued press releases to calm investors.
The bank's collapse also raised concerns about further instability in the banking sector, with some companies transferring their deposits out of regional banks like Silicon Valley Bank. However, banking experts believe that other banks will remain stable, as Silicon Valley Bank was overly specialized in providing banking to a risky sector of the economy.
The largest shareholders of SVB Financial Group, the parent company of Silicon Valley Bank, include institutional investors such as The Vanguard Group, BlackRock, and State Street Corporation. These investors own the stock in large exchange traded funds that track the performance of the S&P 500.
Here are the largest shareholders of SVB Financial Group:
- The Vanguard Group, Inc.
- SSgA Funds Management, Inc.
- BlackRock Fund Advisors
- Alecta Pension Insurance Mutual
- JPMorgan Investment Management, Inc.
Acquisition
HSBC UK acquired Silicon Valley Bank UK for £1, at no cost to taxpayers and with depositors fully protected.
The acquisition was a significant move, as it helped protect depositors' funds and avoided a potential bank collapse.
First Citizens BancShares acquired the commercial banking business of SVB, buying around $119 billion in deposits and $72 billion of SVB's loans, discounted by $16.5 billion.
This deal also included the acquisition of SVB Private, which was initially going to be auctioned separately.
SVB's 17 branches reopened as a division of First Citizens Bank, with all SVB depositors becoming depositors of First Citizens.
First Citizens was the 30th-largest bank in the United States, in terms of assets, at the end of 2022.
After the acquisition, First Citizens is set to enter the top 20 largest banks in the US.
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Bank Ownership
Silicon Valley Bank was founded in 1983 by Bill Biggerstaff, Robert Medearis, and Roger Smith.
The bank was a subsidiary of SVB Financial Group, a publicly-traded company listed as SIVB.
SVB Financial Group was a component of the S&P 500, which means it was part of a large index of stocks.
The largest shareholders of SVB Financial Group included The Vanguard Group, BlackRock, and State Street Corporation.
These companies owned the stock in large exchange traded funds that track the performance of the S&P 500.
The South Korean National Pension Service owned 100,000 shares in SVB's holding company, SVB Financial Group.
SVB Financial Group was primarily owned by institutional investors.
Here are the largest shareholders of SVB Financial Group:
- The Vanguard Group, Inc.
- SSgA Funds Management, Inc.
- BlackRock Fund Advisors
- Alecta Pension Insurance Mutual
- JPMorgan Investment Management, Inc.
Financial System
The financial system is facing a major challenge as interest rate increases reduce the market value of bonds held by banks. This is especially true for banks like Silicon Valley Bank, which lost a combined $150 billion in two days, with U.S. banks losing $100 billion and European banks losing $50 billion.
The collapse of Silicon Valley Bank has highlighted the risk of banks investing in low-rate policies, which can become less valuable as interest rates rise. This is a concern for banks that have invested heavily in bonds under low-rate policies.
Several banks, such as First Republic Bank and Western Alliance Bancorporation, have issued press releases to calm investors, but banking experts believe that other banks will remain stable. This is because SVB was overly specialized in providing banking to a risky sector of the economy.
The Dodd-Frank Act has strengthened financial regulations since the 2008 financial crisis, which preceded the Great Recession. SVB had reached the threshold under the act requiring it to submit a resolution plan, but it had not participated in periodic stress testing.
The Federal Reserve has created a Bank Term Funding Program to shore up liquidity for other at-risk banks. This program aims to provide stability to the financial system.
Circle, a peer-to-peer payments technology company, had $3.3 billion of its cash reserves held at Silicon Valley Bank, which is about 8% of its total reserves. This highlights the risk of banks failing and affecting other companies that hold their deposits.
The Bottom Line
The collapse of Silicon Valley Bank in March 2023 was the largest bank failure since the financial crisis of 2008. The bank's failure served to remind us that there are several weaknesses within the banking system, including the lack of oversight for banks with less than $250 billion in assets.
The Federal Deposit Insurance Corporation (FDIC) responded quickly to the collapse, implementing several measures to reduce depositors' losses and renew confidence in the banking system and the economy overall.
The FDIC created a Deposit Insurance National Bank of Santa Clara to protect insured depositors of Silicon Valley Bank. This move ensured that depositors would have access to their insured deposits.
The FDIC's swift action was likely a result of the already-present fears of a recession, which further shook consumer confidence in the economy. This highlights the importance of a stable banking system during times of economic uncertainty.
The bank's failure was a significant event, and it's essential to understand the facts surrounding it. Here are some key statistics:
The FDIC's Deposit Insurance Fund is designed to protect depositors in the event of a bank failure. The fund's goal is to maintain a stable banking system and ensure that depositors have access to their insured deposits.
The FDIC's swift action in the case of Silicon Valley Bank helped to renew confidence in the banking system and the economy overall. This is a positive development, especially during times of economic uncertainty.
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Frequently Asked Questions
Will Silicon Valley Bank still exist?
Silicon Valley Bank still exists, but as a division of First Citizens Bank. It continues to serve its existing clients and customers.
Does the SVB Financial Group still exist?
No, the SVB Financial Group does not exist in its original form after the California Department of Financial Protection and Innovation closed the bank on March 10, 2023. The FDIC established a bridge bank to manage the bank's assets.
Is Silicon Valley Bank still good?
Silicon Valley Bank is no longer a functioning bank after it was seized by regulators on March 10, 2023. Its failure marks the first U.S. bank failure in two years, with significant implications for depositors and the financial industry.
Is SVB stock worthless now?
SVB stock is considered worthless since the institution no longer exists and its shares are no longer traded. You may be eligible to claim a capital loss on your tax return.
Sources
- https://www.law.uw.edu/news-events/news/2023/svb-collapse/
- https://www.investopedia.com/what-happened-to-silicon-valley-bank-7368676
- https://apnews.com/article/svb-fed-bonds-rates-banks-inflation-a24b28b3caeede91c76cd120aa9b7966
- https://en.wikipedia.org/wiki/Silicon_Valley_Bank
- https://en.wikipedia.org/wiki/Collapse_of_Silicon_Valley_Bank
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