Economics

Lessons From The Hoover Policy Boot Camp

Contributing Scholar: Amit Seru

Anatomy of a Bank Collapse: Lessons from Silicon Valley Bank and First Republic

The collapse of Silicon Valley Bank served as a wake-up call for other financial institutions, regulators, and investors, highlighting the need for more robust risk management practices, more transparency, and greater need to proactively address vulnerabilities in the financial system. Amit Seru, Senior Fellow at the Hoover Institution, examines what factors led up to SVB’s failure and presents innovative short-term and long-term solutions to help stave off bank failures in the future.

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From Boom to Bust: How $140 Billion in Deposits Led to SVB's Collapse

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Published March 28, 2024

As the United States economy came to a disruptive halt in 2020, Silicon Valley Bank (SVB) experienced a wave of deposits totaling $140 billion. This was the first in a cascade of events which ultimately led to its collapse. As SVB mismanaged its deposits into long-term securities, interest rates rose, resulting in $22 billion in unrealized losses. When investors became spooked, SVB could not survive the inevitable run on the bank thanks in large part to its high proportion of uninsured deposits. Amit Seru shows how SVB’s collapse exposed the vulnerabilities in the United States banking system, raising questions about moral hazard, future bank failures, and bailouts for failing institutions.

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