From Hero to Zero - The Case of Silicon Valley Bank

Journal of Economics and Business, Forthcoming

34 Pages Posted: 29 Mar 2023 Last revised: 17 Sep 2023

See all articles by Lai Van Vo

Lai Van Vo

Western Connecticut State University

Huong T. T. Le

Northeastern Illinois University

Date Written: Seotember 05, 2023

Abstract

This paper examines the factors contributing to the rapid collapse of Silicon Valley Bank, once regarded as one of the best banks. We show that the bank invested heavily in debt securities during a period of low interest rates, and the subsequent surge in interest rates in 2022 resulted in significant unrealized losses. Additionally, the bank's deposits were heavily concentrated among a small group of venture capitalists, which increased the likelihood of a bank run. Furthermore, the bank held less equity capital and had an inefficient risk management system, exacerbating the impact of the risk. Overall, the mismanagement of assets and liabilities led to the bank’s failure.

Keywords: bank collapse, bank failure, debt securities, risk management, Silicon Valley Bank, SVB

JEL Classification: G14, G21, G24, G28

Suggested Citation

Vo, Lai Van and Le, Huong T. T., From Hero to Zero - The Case of Silicon Valley Bank (Seotember 05, 2023). Journal of Economics and Business, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4394553 or http://dx.doi.org/10.2139/ssrn.4394553

Lai Van Vo (Contact Author)

Western Connecticut State University ( email )

Danbury, CT 06810
United States
203-837-9379 (Phone)

Huong T. T. Le

Northeastern Illinois University ( email )

Chicago, IL 60625
United States

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