Silicon Valley Bank, which catered to the tech industry for three decades, collapsed on March 10, 2023, after the Santa Clara, California-based lender suffered from an old-fashioned bank run. State regulators seized the bank and made the Federal Deposit Insurance Corporation its receiver.
Why did Silicon Valley Bank collapse so suddenly? The short answer is that SVB did not have enough cash to pay depositors so the regulators closed the bank. The bank recently said it took a US$1.8 billion hit on the sale of some of those securities and they were unable to raise capital to offset the loss as their stock began dropping. That prompted prominent venture capital firms to advise the companies they invest in to pull their business from Silicon Valley Bank. This had a snowball effect that led a growing number of SVB depositors to withdraw their money too.
For depositors with $250,000 or less in cash at SVB, the FDIC said that customers will have access to all of their money when the bank reopens. On the whole, U.S. bank failures aren’t all that common. For example, there were none in 2021 and 2022.