Silicon Valley Bank: Lessons from a bank collapse
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Silicon Valley Bank: Lessons from a bank collapse

As the drumbeat of bad news from the US regional banks grows steadily louder, Euromoney talks to market veterans about the lessons that can be learned from the event that started it all: Silicon Valley Bank’s collapse in March.

Photo: Reuters


  • The US regional banking system has just sustained its third bank collapse this year. Following an initial sharp slump in reaction to the news, bank stocks have continued to fall as short sellers target perceived weakness. Can the sector stabilize as the impact of rate rises on many of these lenders’ business models becomes apparent?

“I don’t think anything could have helped withstand a withdrawal rate of $42 billion,” says Chip MacDonald, financial markets specialist at Jones Day. “If $42 billion out of a total $200 billion of assets walks out the door in 24 hours – nobody maintains that kind of liquidity. The fact is SVB had a very concentrated customer base with a concentrated behaviour pattern.”

It is widely agreed that its concentration of deposits among the venture capital community was behind Silicon Valley Bank’s downfall on March 10 this year.

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