123-0071-1

Collapse of Silicon Valley Bank

An Avoidable Mishap?

Case Study
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

This case was written by Anupam Mehrotra and reviewed by Dr. A. Saravanan Naidu, Amity
Research Centers Headquarter, Bangalore. It is intended to be used as the basis for class
discussion rather than to illustrate either effective or ineffective handling of a management
situation. The case was compiled from published sources.

© 2023, Amity Research Centers Headquarter, Bangalore.

Website: www.amity.edu/casestudies/

No part of this publication may be copied, stored, transmitted, reproduced or distributed in any
form or medium whatsoever without the permission of the copyright owner.

case centre Distributed by The Case Centre All rights reserved e info@thecasecentre.org t +44 (0)1234 750903 or +1 781 236 4510 w www.thecasecentre.org
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

Author: Anupam Mehrotra

Collapse of Silicon Valley Bank: An Avoidable Mishap?

Abstract: Banking was a serious business dealing with public money. Banks had a fiduciary
character which implied that it was a business squarely resting on trust, credibility, and confidence.
Trust and faith itself was a function of resilience, profitability and long term solvency of the banks
which was reinforced by elements like capital adequacy and liquidity. However, on March 10th
2023, the Silicon Valley Bank, the 16th largest bank of the US, commanding $212 billion of assets
at one time collapsed, making it the biggest lender to collapse since the global financial crisis of
2007-09, presenting a classic example of how short term liquidity crunch may hit the credibility,
dilute confidence through a chain of events and eventually lead to the collapse of a giant among
financial institutions. The fall of the bank threw up questions both on the fragility of the US
financial system and the proficiency of the regulators in anticipating and proactively plugging the
holes in the financial fabric. The subsequent failure of Signature Bank and the widespread
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

weakness shown in many other banks in distant geographies intrigued the analysts who fervently
debated on whether the event was a one-off accident or the tip of an iceberg.

Case Study

“They knowingly took a risk, and when the risk didn’t pay off, investors lose their money. That’s
how capitalism works. I am firmly committed to holding those responsible for this mess fully
accountable and to continuing our efforts to strengthen oversight and regulation of larger banks
so that we are not in this position again.”1
– Joe Biden, the US President

“My only interest is that we identify what went wrong here. We will find that, and then make an
assessment of what are the right policies to put in place so that it doesn’t happen again.”2
– Jerome Powell, Chairman of the Federal Reserve

S cript of bad days was often written in the best of times. The unprecedented growth in
deposits during and post COVID-19 period was a spinoff of the boom in the technology
sector that led to the growing corporate deposits and payroll accounts of technology companies
with Silicon Valley Bank (SVB).3 The bank bloated its balance sheet and leveraged it for maturity

1 “Update: President Biden demands accountability for Silicon Valley Bank Failure”,
https://www.cbsnews.com/sanfrancisco/news/silicon-valley-bank-failure-weighing-heavy-on-bay-area-
economy/, March 13th 2023
2 “Transcript: Fed Chief Powell’s Postmeeting Press Conference”, https://www.wsj.com/articles/transcript-fed-

chief-powells-postmeeting-press-conference-1b9b2bd1, March 22nd 2023

3 Barrett Jonathan, “Silicon Valley Bank: Why did it collapse and is this the start of a banking crisis?”,

https://www.theguardian.com/business/2023/mar/13/silicon-valley-bank-why-did-it-collapse-and-is-this-the-
start-of-a-banking-crisis, March 13th 2023
“© 2023, Amity Research Centers HQ, Bangalore. All rights reserved.”

Page – 1
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

transmission of unprecedented magnitude to maximise the spread. In the year that followed, a
slowdown in the technology sector on the back of the fear of recession triggered by a series of
rate hikes by the Federal Reserve led to an unusual withdrawal of deposits by technology
companies in need of cash.4 A major portion of the deposits of the bank was invested in risk free
low interest rate bonds on Held-to-maturity (HTM) basis which meant that the bank did not have
to account for the market fluctuations in the bond value as they were not for sale before
maturity. Such portfolios normally masked the true value of the assets of the company as the
assets were shown in the balance sheet at a value different from the market or realisable value
at any given point of time. There was no major issue, however, as long as the bank could retain
such a portfolio and wait till maturity, but the situation would turn alarming if the bank, under
a liquidity crunch, was forced to prematurely liquidate such a portfolio even at the cost of
booking a loss.5

SVB’s anticipation that the interest rates would remain low for long and that they would
manage to retain the bonds till maturity went wrong when the rate cycle reversed and interest
rates began to rise sooner than later causing its long term bonds to substantially erode in
value.6 The bank booked a huge loss in encashing the US long dated securities to pay off the
depositors and then tried to replenish the capital loss through equity sale. The move panicked
the depositors and triggered a run on deposits bringing the bank to ground as the biggest
banking casualty since Washington Mutual in 2008. 7 The magnitude of the contagion threat
could be measured by the necessity of Presidential intervention when Joe Biden in his White
House speech had to assure the depositors about the safety of their deposits and his resolve
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

to fix accountability of the mishap and to avoid similar events through more vigilant oversight
and regulation.8 In a series of events that followed, the Credit Suisse bank was taken over by
its arch rival UBS Group, a multinational investment bank, in a rescue package designed to
address the panic in financial markets. The First Republic Bank facing a similar run on deposits
was protected from a collapse through multibillion deposits by the private sector lenders as
part of a rescue plan designed with the intervention of the US Treasury Secretary. 9 The
Chairman of the Federal Reserve, Jerome Powell, assured that the responsible factors behind
the event would be identified and emphasised the need to put the right policies in place for
preventing recurrence of such events.10

Silicon Valley Bank: A Background Note

Founded in 1983, SVB soon became a popular institution and a status symbol among the
wealthy and risk-loving clientele of venture capitalists of the Silicon Valley. It quickly adapted
to the Silicon Valley culture of innovation, risk taking and rapid growth much like the agile
startups of the region and grew at a rapid pace with its assets growing manifold to $209 billion
within four years from 2018 to 2021, that transformed it into the nation’s 16 th largest bank by

4 “Silicon Valley Bank collapse: Here’s How it Happened and Why SVB Failed”,
https://www.euronews.com/next/2023/03/11/silicon-valley-bank-collapse-heres-how-and-why-it-happened,
March 15th 2023
5 Sorkin Andrew Ross, et al., “Why did Silicon Valley Bank Collapse?”,

https://www.nytimes.com/2023/03/11/business/dealbook/silicon-valley-bank-collapse.html, March 11th 2023

6 “What Really Went Wrong at Silicon Valley Bank”, https://www.economist.com/leaders/2023/03/13/what-

really-went-wrong-at-silicon-valley-bank, March 13th 2023

7 Thompson Mark, “Global Banking Crisis: What Just Happened?”,

https://edition.cnn.com/2023/03/17/business/global-banking-crisis-explained/index.html, March 20th 2023

8 “Update: President Biden demands accountability for Silicon Valley Bank Failure”, op.cit.
9 “Global Banking Crisis: What Just Happened?”, op.cit.
10 “Transcript: Fed Chief Powell’s Postmeeting Press Conference”, op.cit.

Page – 2
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

the year 2022.11 SVB focussed on and offered products and services such as venture debt, cash
management, wealth management, and a variety of services customised to the emerging
needs of the sector as it knew the startup ecosystem and its capital life cycle inside out. The
business model proved successful both within and outside the geography which the bank
operated in.12

The pandemic years were a golden period for the tech startups and the established companies
alike, as the demand for digital services and electronic gadgets was high. The pandemic proved
to be a blessing in disguise for the bank too as its services during this period were in high
demand by the technology sector for which it was a favourite destination when it came to
their finance related needs.13 The bank extended its financial products and services to around
2,500 venture capital firms and almost 50% of the technology based and life science
companies that had the backing of the venture capitalists. 14 As the tech companies harvested
huge revenues during the COVID-19 period on account of increased spending on
entertainment and other IT services by people confined to their homes, the bank witnessed a
phenomenal surge in its deposits.15 As a usual practice, the bank like most other companies,
invested in the long term dated Government securities providing modest but safe and
uninterrupted returns which was fine as long as the central bank continued with the easy
money policy and kept the rates low.16

As the rates started to rise, the SVB, being overexposed to low-rate bonds had reason to be
Educational material supplied by The Case Centre

alarmed but the balance sheet of the bank was still robust, and the bank’s stock was highly
Copyright encoded A76HM-JUJ9K-PJMN9I

rated by the Wall Street analysts and Forbes. The US companies backed by venture capital had
raised a whopping $330 billion in the rock bottom interest rates era of 2021. A sizable portion
of these borrowings flowed to the SVB which enjoyed an effortless doubling up of its deposits
which were parked in long term low interest yielding Government bonds. By investing in
longer-term bonds, the bank conditioned its balance sheet to the scenario of the interest rates
remaining low and not rising any time soon, which turned out to be a risky trap the bank locked
itself in (Exhibit I). When interest rates started their upward journey in measures larger than
expected, the flow of funds to the clients of the SVB began to dry up which they tried to
replenish through their withdrawals from the bank. Having invested heavily in bonds when the
yields were bottom low, SVB took a severe hit on its bond portfolio on account of an aggressive
jump in interest rates in the period that followed. This was the time when Moody’s Investor
Service, a credit rating agency, noticed the crack in the balance sheet as the bonds portfolio
maintained in HTM category masked its real discounted worth implying huge unrealised
losses.17

11 Morrow Allison, “Why almost everyone failed to predict Silicon Valley Bank’s collapse?”,
https://edition.cnn.com/2023/03/26/business/silicon-valley-bank-red-flags/index.html, March 26th 2023
12 Gompers Paul, “Silicon Valley Bank’s Focus on Startups Was a Double-Edged Sword”,

https://hbr.org/2023/03/silicon-valley-banks-focus-on-startups-was-a-double-edged-sword, March 17th 2023

13 “Silicon Valley Bank: Why did it collapse and is this the start of a banking crisis?”, op.cit.
14 Giang Vivian, “About the Silicon Valley banking crisis, what we know so far”,

https://cn.nytimes.com/business/20230314/svb-silicon-valley-bank-explainer/zh-hant/, March 14th 2023

15 Power John, “Why did Silicon Valley Bank fail and is a financial crisis next?”,

https://www.aljazeera.com/economy/2023/3/14/why-did-silicon-valley-bank-fail-and-is-a-financial-crisis-next,
March 14th 2023
16 “About the Silicon Valley banking crisis, what we know so far”, op.cit.
17 Neufeld Dorothy, “Timeline: The shocking Collapse of Silicon Valley Bank”,

https://www.visualcapitalist.com/timeline-shocking-collapse-of-silicon-valley-bank/, March 12th 2023

Page – 3
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

Exhibit I
Assets and Liabilities of the Silicon Valley Bank towards the close of 2022

Source: Neufeld Dorothy, “Timeline: The shocking Collapse of Silicon Valley Bank”,
https://www.visualcapitalist.com/timeline-shocking-collapse-of-silicon-valley-bank/ March 12th 2023

The objective of the US Central bank had been to maintain a moderate rate of economic growth
with price stability. Buoyancy and inflation could lead to formation of bubble that might turn out
to be challenging to overall economic stability. To keep the economy on a moderate track rather
than allowing it to heat up with the growing and unrelenting inflation, Federal Reserve began to
Educational material supplied by The Case Centre

raise the rates.18 The quantum of each rise in the policy rate was the highest ever seen since
Copyright encoded A76HM-JUJ9K-PJMN9I

1980’s and that created a turmoil. The SVB was badly hit as the rising rates put the highly
leveraged tech sector in trouble, on one hand, and diluted the value of the dated long term
Government bonds on the other, slapping a major unrealised loss on the bank. The total
unrealised losses of the US banks rose to the tune of $620 billion towards the close of the year
2022 and could worsen further if the rates continue to rise as per the Federal Deposit Insurance
Corporation’s19 (FDIC) observations. SVB took a $1.8 billion hit which burnt a hole in its capital
fabric and the bank rushed to raise capital through equity route to fill the gap.20

The renowned Economist and Chief Economic Advisor at Allianz, Mohamed El Erian (El Erian),
severely criticised the prolonged cheap money policy of the Federal Reserve that amounted to
a late reaction to inflation followed by a rapid winding up with relatively higher doses of rate
rise to tame seemingly uncontrollable inflation, which had a serious bearing on financial stability
and could trigger recession in the economy. El-Erian pointed out that the Fed’s policy of
aggressive monetary tightening that resulted in failure of several banks in the US, one after the
other, might turn out to be a major policy mistake in the history of the Federal Reserve.21

Collapse of Silicon Valley Bank: What Went Wrong?

The business of banking was based on trust and confidence which if breached could pull even an
otherwise solvent entity down. This was exactly what happened with the SVB. A technically solvent

18 Curry Benjamin, “What Happens When The Fed Raises Interest Rates”,
https://www.forbes.com/advisor/investing/fed-raises-interest-rates/, April 12th 2023
19 A body responsible for insuring the deposits and maintaining public confidence in the nation’s financial system.
20 Egan Matt, “The Fed needs to stop raising rates now, former FDIC chair says after Silicon Valley Bank Failure”,

https://edition.cnn.com/2023/03/13/investing/sheila-bair-svb-fed-rates/index.html, March 13th 2023

21 Salfiti Zinya, “Top Economist Mohd El Erian Once Again Warns of the Biggest Fed Policy Mistake in Several

Decades”, https://markets.businessinsider.com/news/stocks/mohamed-el-erian-warns-biggest-fed-mistake-
inflation-monetary-policy-2023-4, April 3rd 2023

Page – 4
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

SVB collapsed on account of a run on its deposits caused by the ruptured trust and confidence of
its depositors. A fundamentally fragile business model that accounted for the structural weakness
of the bank, and some errors of judgement in attempting to meet the increasing withdrawal
demand of its depositors caused the fall of the bank at a pace never imagined by the
stakeholders.22 While the experts criticised the bank for its judgmental mistakes, they surmised
that the bank could have been saved from destruction.23

A rapid rise in the business and assets of any financial institution must be viewed as an alarm as
observed by Dennis M. Kelleher, CEO of Better Markets24, because the managerial competence
and the compliance structure in general does not grow with a matching pace.25 Exposed to the
heat of the rising rates and blown up repayment obligations, the tech clients of the bank looked
for fresh funding and started drawing upon their deposits with the SVB. To meet the ever-rising
withdrawal demand the bank was forced to sell its bond holding in HTM category booking a loss
of $1.8 billion on account of a fall in bond prices in response to the jump in interest rates from
near zero to around 4.75% in a few months. The unrealised loss in bond valuations would not
matter if the portfolio was held till maturity, but the loss crystallised as the bank was forced to
sell them prematurely to meet the deposit withdrawal demand of its clients.26,27 The news of
selling assets at a huge loss made investors and customers jittery who lined up to withdraw their
deposits amounting to a classic bank run pushing the bank to its destiny of being the second
largest bank failure in the history of the US.28 Within 48 hours of the event the bank had
collapsed.29 There was a chain of events finally exploding in to the collapse of the bank. 30
(Annexure I).
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

On a closer scrutiny of the balance sheet of the bank, the weakness was evident with respect to
corporate mismanagement which surprisingly was not pointed out earlier. 31 Further drilling
down to unearth the causes of failure brought quite a good number of convincing contributors
to the crisis. For instance, the Dodd-Frank package had prescribed several compliance
requirements for credit discipline and had considered the banks with assets of more than $50
billion as systemically important institutions. It had mandated for them a stress test with annual
frequency and maintenance of a prescribed amount of capital which was reversed by the 2018
bill on demand, inter alia, of SVB’s CEO Greg Becker, who had argued that the threshold of $50
billion assets for fixing annual frequency of the stress tests of banks was unnecessary as they did
not pose a systemic risk. While the erstwhile US President Donald Trump (Trump) had lauded
the reversal bill as a ‘fixer’ of the ‘job killer’ Dodd-Frank regulations, the Congressional Budget
Office had however cautioned that raising of the threshold for annual stress tests might increase

22 “Why did Silicon Valley Bank Collapse?”, op.cit.

23 Sauer Megan, “Why some Silicon Valley CEOs don’t blame SVB for its crash: ‘I still fundamentally believe’
nothing was ‘wrong with the bank’”, https://www.cnbc.com/2023/03/23/why-some-silicon-valley-ceos-dont-
blame-svb-for-its-crash.html, March 23rd 2023
24 It is a non-profit, non-partisan, and independent organisation working to build a more secure financial system

for all Americans.

25 “Why almost everyone failed to predict Silicon Valley Bank’s collapse?”, op.cit.
26 Watts William, “Silicon Valley Bank is a reminder that things tend to break when Fed hikes rates”,

https://www.marketwatch.com/story/svb-reminder-to-stock-market-investors-things-tend-to-break-when-fed-
gets-aggressive-b762936f, March 11th 2023
27 “The Fed needs to stop raising rates now, former FDIC chair says after Silicon Valley Bank Failure”, op.cit.
28 Helmore Edward, “Why did the $212bn tech-lender Silicon Valley bank abruptly collapse?”,

https://www.theguardian.com/business/2023/mar/17/why-silicon-valley-bank-collapsed-svb-fail, March 17th

2023
29 “Silicon Valley Bank: Why did it collapse and is this the start of a banking crisis?”, op.cit.
30 “Explained Silicon Valley Bank (SVB) Crisis”, https://www.civilsdaily.com/news/explained-silicon-valley-bank-

svb-crisis/, March 13th 2023

31 “Why almost everyone failed to predict Silicon Valley Bank’s collapse?”, op.cit.

Page – 5
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

the chances of failure of the financial institutions with assets in the range of $100 billion and
$250 billion.32

Another factor responsible for the failure of the bank was the structure of its liabilities which
had a significantly large proportion amounting to around 55% of its deposit portfolio locked up
in long term dated securities that were safe but not due for maturity anytime soon and were
absolutely unhedged against the risk of rising interest rates which normally was referred as a
textbook necessity. All along the period over which Fed had been hiking the rates with an
unprecedented pace, the bank surprisingly had the position of its Chief Risk Officer vacant.33

According to experts, in addition to the investment decisions, poor risk management,

irresponsible corporate governance and a remarkable rise in interest rates over a short span of
time were collectively responsible for the fall of the SVB. The bank’s decision to raise capital
through equity route to fill the gap given by the recent loss on bonds portfolio. The move, turning
out to be the last nail in the coffin, alarmed the investors who came up in hordes to withdraw
all their money at the same time implying a classic run on the bank. 34 The spread of panic
triggered a chain of events causing a run on a bank and its eventual collapse (Annexure II). There
was also a mistake of judgment on the part of the bank management in deciding to sell
convertible preferred stock, in addition to the equity investment by General Atlantic, which
could not be wound up till the next day and the bank’s management unwittingly spared extra
time to the clients and investors to doubt the credentials and strength of the bank which later
translated into massive withdrawals of deposits.35
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

One of the major causes of the bank’s failure was a very high percentage of wealthy depositors
locking their deposits much in excess of $250,000 which had been the deposit insurance ceiling
fixed by the Federal Government over which all deposits were uninsured and vulnerable to total
loss.36 They fled with their deposits and their panic was rational.37 The assets and deposits still
remaining with the bank after the collapse were sought to be protected by the regulators by
seizing its assets.38 Quite unlike a retail bank with a broad-based deposit structure, the SVB had
a narrow deposit base with few big ticket clients having much larger deposits that made the run
more severe and the eventual collapse of the bank.39

The critics blamed that the bank had been short-sighted and unaware of its surroundings as it
did not pay attention to the evolving broader economic realities which affirmed the overheating
of the economy post the prolonged pandemic stimulus era which had been pushing the Federal
Reserve to reverse its interest rate stance to fight rapidly rising inflation.40 There was no single
explanation to the factors behind the shocking collapse of the $212 billion institution which
exposed the global economy to the most dreaded financial sector crisis after 2008. However,
there was a common understanding that it was a combined responsibility of the Trump-era
reversal of Dodd-Frank regulatory package of stress testing, poor risk management practices,
and unusually sharp interest rate rises in the post pandemic period to fight inflation. Credited
with predicting the 2008 financial crisis, Danny Moses41, however attributed it to no greed or

32 “Why did the $212bn tech-lender Silicon Valley bank abruptly collapse?”, op.cit.
33 “Why almost everyone failed to predict Silicon Valley Bank’s collapse?”, op.cit.
34 “What really went wrong at Silicon Valley Bank”, op.cit.
35 “Why did Silicon Valley Bank Collapse?”, op.cit.
36 “Silicon Valley Bank collapse: Here's how it happened and why SVB failed”, op.cit.
37 “What really went wrong at Silicon Valley Bank”, op.cit.
38 “Silicon Valley Bank collapse: Here's how it happened and why SVB failed”, op.cit.
39 “Silicon Valley Bank: Why did it collapse and is this the start of a banking crisis?”, op.cit.
40 “What really went wrong at Silicon Valley Bank”, op.cit.
41 An investor who predicted the 2008 financial crisis in the book and movie ‘The Big Short’.

Page – 6
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

anything else except bad risk management. He added, “It was complete and utter bad risk
management on the part of SVB.”42

Had it not been for a sudden run on the bank, SVB had adequate assets to pay off all its
depositors and stakeholders, may be after some waiting period. Collapse of the SVB sent sudden
shock waves to the technology sector already wailing under the pressure of rising rates, looming
recession, and shrinking business. The depositors in general got scared about the fate of other
similar banks and tended to lose faith in them too. Sensing the sentiments, and to prevent the
contagion, the regulator and the Government came forward to guarantee the depositors’ money
through a fund created by additional premium to be paid collectively by all the banks to the
FDIC, if necessary, thus imposing a cost on the whole industry for the poor management of one.43

In complete disregard to the concentration risk, the SVB had been disproportionately
concentrated in the technology sector, that too in the venture capital and startup firms, which
turned out to be a major issue in its collapse, which occurred with a flash mainly on account of
the wholesale nature and large size of each of the clients who had been highly interconnected
too. The risk of run on the bank could have been substantially reduced if the bank had a large
and diversified base of retail clients.44 (Annexure III). Commentators and analysts, however, put
the blame on venture capitalists too, who prompted the startups to pull out their deposits in
hordes after the SVB incurred a $1.8 billion loss in its $21 billion sale of long-term bonds.45

As an aftermath, the Signature Bank with a similar banking model faced a run too and instantly
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

collapsed forcing FDIC to shut it down. In an emergency rescue deal, Credit Suisse, the second
largest bank of Switzerland, was taken over by the UBS Group, its closest rival, and the largest
Swiss bank after a rapid erosion of more than 30% in the market value of the former. Another
bank facing the shock waves of the depositors’ panic and close to be swept away by a similar
run was the First Republic Bank which eventually was rescued by several private sector lenders
depositing billions of dollars with the bank as part of an agreement designed with the
intervention of the bigwigs like Janet Yellen, the US Treasury Secretary and Jamie Dimon, the
CEO of JPMorgan.46 As revealed by the Global Market Intelligence of S&P, both the SVB and
Signature Bank had strikingly small percentage of insurance protected depositors having
deposits less than $250,000, implying that a disproportionately large majority of depositors had
deposits in excess of $250,000, which had been the insurance ceiling of the deposits by each
depositor. That sensitised the big-ticket depositors to any weaknesses of the bank and exposed
the bank to the risk of run.47 (Exhibit II).

Market experts claimed that the instant crisis throwing the regional banks rollercoaster was a
crisis of contagious bank runs quite distinct from the solvency crisis of 2008 (Annexure IV). In
this regard, Yellen expressed her resolve to restore confidence in the markets with supportive
action. According to her, “Our intervention was necessary to protect the broader U.S. banking
system. And similar actions could be warranted if smaller institutions suffer deposit runs that
pose the risk of contagion. As opposed to the banking crisis of 2008, which was a ‘solvency crisis’,

42 “Why did the $212bn tech-lender Silicon Valley bank abruptly collapse?”, op.cit.
43 “What really went wrong at Silicon Valley Bank”, op.cit.
44 “Silicon Valley Bank’s Focus on Startups Was a Double-Edged Sword”, op.cit.
45 “Why some Silicon Valley CEOs don’t blame SVB for its crash: ‘I still fundamentally believe’ nothing was ‘wrong

with the bank’”, op.cit.

46 “Global banking crisis: What just happened?”, op.cit.
47 Richter Felix, “SVB and Signature Were Highly Exposed to Risk of a Bank Run”,

https://www.statista.com/chart/29478/share-of-fdic-protected-deposits-at-selected-banks/, March 13th 2023

Page – 7
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

the current crisis is rooted in ‘contagious bank runs’, suggesting that restoring confidence is key
to stabilizing the situation.”48

Exhibit II
Risk of Bank Run Inherent in the Business Model of SVB and Signature Bank
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

Source: Richter Felix, “SVB and Signature Were Highly Exposed to Risk of a Bank Run”,
https://www.statista.com/chart/29478/share-of-fdic-protected-deposits-at-selected-banks/,
March 13th 2023

What succinctly summed up the macroeconomic dynamics triggering the unfortunate collapse
of the SVB and the subsequent financial sector upheaval, was the observation made by the
renowned Indian Economist and former Chief Economist of IMF, Dr. Raghuram Rajan, when he
remarked, “This sense that the spillover effects of monetary policy are huge and aren't dealt
with by ordinary supervision has just escaped our consciousness over the last so many years.
The banks are vulnerable to unwinding after central banks ‘flooded the system with liquidity’.
It's an addiction that you've forced into the system because you flood the system with low return
liquid assets and banks are saying, 'we've got to hold this, but what do we do with it? Let's find
ways to make money off it' and that makes them vulnerable to the withdrawal of liquidity.”49

48 Richter Felix, “Banking Crisis: Regional Bank Rollercoaster”, https://www.statista.com/chart/29545/stock-

performance-of-us-regional-banks/, March 21st 2023
49 Rees Tom, “‘Addiction forced in to the system’: Raghuram Rajan expects more bank troubles”,

https://www.ndtv.com/india-news/raghuram-rajan-who-foresaw-2008-crisis-expects-more-bank-troubles-
3928114, April 7th 2023

Page – 8
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

Annexure I
Silicon Valley Bank Crisis and Collapse Explained
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

Source: “Explained Silicon Valley Bank (SVB) Crisis”,

https://www.civilsdaily.com/news/explained-silicon-valley-bank-svb-crisis/, March 13th 2023

Page – 9
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

Annexure II
Chain of Events Causing a Run and Eventual Collapse of a Bank
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

Source: Richter Felix, “Bank Runs: When Banks Get Caught in a Spiral of Fear”,
https://www.statista.com/chart/29540/bank-runs-explained/, March 21st 2023

Annexure III
Excessive Exposure to Technology Sector and Start-ups Leading to Concentration Risk

Source: Cembalest Michael, “Silicon Valley Bank Failure”,

https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/silicon-
valley-bank-failure-amv.pdf, March 10th 2023

Page – 10
 123-0071-1
Collapse of Silicon Valley Bank: An Avoidable Mishap?

Annexure IV
Reaction of the Regional Banks to the Collapse of Silicon Valley Bank
Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

Source: Richter Felix, “Banking Crisis: Regional Bank Rollercoaster”,

https://www.statista.com/chart/29545/stock-performance-of-us-regional-banks/, March 21st 2023

Page – 11