In This Article
On Thursday, March 9, 2023, depositors pulled $42 billion from Silicon Valley Bank (SVB) in a single business day—and queued another $100 billion for withdrawal the next morning [1][5]. Before the bank could open on Friday, March 10, the California Department of Financial Protection and Innovation closed the Santa Clara-based lender and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver [5]. With approximately $209 billion in total assets at the end of 2022, SVB became the second-largest bank failure in United States history, triggering a broader regional banking panic that toppled Signature Bank and First Republic Bank within two months [3][5].
Although the run itself unfolded at the speed of venture-capital group chats and online wire transfers, the balance-sheet fragility that destroyed Silicon Valley Bank built up in plain sight between 2019 and 2022 [1][2]. Flooded with commercial deposits from venture-backed technology and life-science startups during the pandemic liquidity boom, SVB tripled its asset base in three years and parked the vast majority of those short-term, uninsured deposits in long-duration government and agency mortgage-backed securities [1][2]. When the Federal Reserve raised its benchmark interest rate by nearly 4.5 percentage points between March 2022 and March 2023 to combat inflation, the market value of SVB’s unhedged bond portfolio plunged—turning a classic duration mismatch into a fatal solvency and liquidity run [2][3].
1983–2018: Building the Venture Banking Franchise
Founded in 1983 in Santa Clara, California, Silicon Valley Bank ended its first year of operations with roughly $18 million in assets [2]. Operating as a California state-chartered bank and the principal subsidiary of Delaware-incorporated SVB Financial Group, the institution carved out a specialized niche serving early-stage technology startups, life-science enterprises, venture capital firms, and their executives [2][8].
For over three decades, SVB expanded steadily alongside the Silicon Valley innovation ecosystem, cultivating deep network ties with venture capital general partners who routinely directed their portfolio companies to keep their operating cash at the bank [2][3]. Beginning in 2000, the bank also extended commercial credit across borders from its U.S. balance sheet into markets such as Canada—where it later obtained a foreign bank lending license in Toronto in early 2019 as Canadian venture investment reached $3.5 billion across more than 471 deals in 2018—while establishing commercial banking offices or subsidiaries across the United Kingdom, Ireland, Germany, Israel, and China [8]. Unlike its U.S. parent, which funded itself through domestic deposits, foreign operations such as its Canadian branch were restricted from taking retail public deposits, while its British arm, Silicon Valley Bank UK Limited, operated as a dedicated commercial banking subsidiary [7][8].
| Documented Figure / Metric | Historical Significance & Archival Context |
|---|---|
| 94 percent | By year-end 2022, approximately 94 percent of SVB Financial Group's total deposits exceeded the FDIC's $250,000 insurance cap and were therefore uninsured. |
| $200 | Regulatory oversight failed to keep pace with SVB's rapid expansion from a regional lender into a $200-billion-plus institution. |
| 68 percent | The fragile equilibrium broke on Wednesday, March 8, 2023—the very same day that crypto-focused Silvergate Bank in La Jolla, California, announced its voluntary liquidation after suffering a 68 percent deposit outflow. |
| $1.8 billion | Rather than reassuring the market, the sudden realization of a $1.8 billion loss and the dilutive emergency equity raise alerted investors and depositors to the much larger unrealized losses lurking in SVB's held-to-maturity portfolio. |
2019–2021: The Pandemic Deposit Surge and Duration Mismatch
Between 2019 and 2021, low interest rates and an extraordinary boom in initial public offerings, special-purpose acquisition companies (SPACs), and venture capital fundraising transformed SVB’s balance sheet [1][2]. Over that three-year window, Silicon Valley Bank’s total assets surged by 198 percent—growing from $71 billion in 2019 to more than $211 billion by the end of 2021, and far outstripping the 33 percent median asset growth recorded across a group of 19 peer banks [1][6].
Because SVB’s clientele consisted overwhelmingly of corporate startups and investment funds holding tens of millions of dollars in working capital rather than retail household savers, its funding base was uniquely concentrated [1][2]. By year-end 2022, approximately 94 percent of SVB Financial Group’s total deposits exceeded the FDIC’s $250,000 insurance cap and were therefore uninsured [2].
Loan demand from flush technology startups grew far more slowly than this torrent of deposits. Searching for yield in a near-zero interest-rate environment, SVB management invested the bulk of the incoming cash into long-dated, fixed-rate U.S. Treasury bonds and government-sponsored agency mortgage-backed securities (MBS), classifying the largest share in its held-to-maturity (HTM) accounting portfolio and the remainder as available-for-sale (AFS) [2]. By December 31, 2022, SVB’s held-to-maturity portfolio carried a weighted-average duration of 6.2 years, with the majority consisting of agency MBS maturing in 10 years or more [2].
Under standard banking accounting rules, HTM securities are recorded on the balance sheet at amortized historical cost rather than current market value, provided the bank intends and is able to hold them to maturity [2][3]. While agency MBS and Treasuries carried virtually no credit default risk, they carried substantial interest-rate duration risk: if market interest rates rose, the resale value of low-coupon bonds would fall sharply [3][4].
2022: Monetary Tightening and Supervisory Blind Spots
In March 2022, the macroeconomic environment reversed abruptly. Between March 7, 2022, and March 6, 2023, the Federal Reserve raised the target federal funds rate by nearly 4.5 percentage points [4]. Across the entire U.S. banking system, this rapid tightening depressed the mark-to-market value of bank assets by an average of 10 percent—creating roughly $2 trillion in aggregate economic declines across bank balance sheets, including $620 billion in reported unrealized losses on AFS and HTM securities at FDIC-insured institutions by the fourth quarter of 2022 [4][5].
At Silicon Valley Bank, the impact of higher rates was compounded by management and supervisory failures later documented by the Federal Reserve Board and the U.S. Government Accountability Office (GAO) [1][6]. Focusing on short-term earnings and protection against falling rates, SVB management actually removed interest-rate hedges on its available-for-sale securities as rates rose, leaving its bond portfolio exposed while altering internal risk-modeling assumptions to make duration risks appear smaller [1]. Simultaneously, the tech sector downturn slowed venture capital inflows in the second half of 2022, causing cash-burning startups to draw down their SVB deposit balances to fund ongoing payroll and operations [2].
Regulatory oversight failed to keep pace with SVB’s rapid expansion from a regional lender into a $200-billion-plus institution [1]. Following the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) in 2018 and the Federal Reserve’s 2019 “tailoring” rules, banks with assets between $100 billion and $250 billion faced reduced capital, liquidity, and stress-testing requirements compared with global systemically important banks [1]. Although Federal Reserve examiners noted interest-rate risk deficiencies in 2020, 2021, and 2022 and the Federal Reserve Bank of San Francisco downgraded SVB’s management rating in June 2022, the bank failed its own internal liquidity stress tests without triggering timely enforcement orders to shore up its capital or liquidity [1][6].
March 8–10, 2023: The $142 Billion Run
The fragile equilibrium broke on Wednesday, March 8, 2023—the very same day that crypto-focused Silvergate Bank in La Jolla, California, announced its voluntary liquidation after suffering a 68 percent deposit outflow [5]. Facing persistent deposit attrition and escalating funding costs, Silicon Valley Bank announced a balance-sheet restructuring: it had sold substantially all of its available-for-sale securities portfolio (roughly $21 billion in bonds) at an after-tax loss of $1.8 billion, and it intended to raise $2.25 billion in fresh capital by issuing common and mandatory convertible preferred stock [1][5].
Rather than reassuring the market, the sudden realization of a $1.8 billion loss and the dilutive emergency equity raise alerted investors and depositors to the much larger unrealized losses lurking in SVB’s held-to-maturity portfolio [3][4][5]. On Thursday, March 9, SVB’s stock price plunged by 60 percent, its planned capital raise collapsed, and a conference call in which SVB’s chief executive urged venture capital clients to “stay calm” backfired [5]. Prominent venture capital firms began advising their portfolio companies via social media, email lists, and messaging apps to wire their cash out of SVB immediately [3][5].
Because SVB’s depositors were tightly networked corporate treasurers holding uninsured balances, the coordination problem that normally slows retail bank runs vanished [3][4]. By the close of business on March 9, depositors had withdrawn $42 billion [5]. Overnight, management informed regulators that an additional $100 billion in outflows was scheduled for Friday, March 10—an attempted two-day run of $142 billion representing more than 80 percent of the bank’s deposit base [1][5]. Having exhausted its liquid cash and unable to pledge collateral quickly enough to cover $100 billion in same-day wires, Silicon Valley Bank was closed on the morning of March 10, 2023, and placed into FDIC receivership [1][5].
Emergency Resolution, the BTFP, and Institutional Fallout
Over the weekend of March 11–12, 2023, U.S. and British financial authorities raced to prevent SVB’s collapse from igniting a global run on uninsured commercial deposits [5][7]. When New York regulators closed $110-billion Signature Bank on Sunday, March 12, after a contagious wave of withdrawals, the boards of the FDIC and the Federal Reserve voted unanimously to recommend—and Treasury Secretary Janet Yellen, after consulting with the President, approved—a systemic risk exception under the Federal Deposit Insurance Act [5][6]. The emergency determination guaranteed 100 percent of both insured and uninsured deposits at SVB and Signature Bank, giving startups full access to their payroll accounts on Monday, March 13, while wiping out shareholders and unsecured bondholders and requiring any losses to the Deposit Insurance Fund to be recouped through a special assessment on banks [5].
Simultaneously on March 12, the Federal Reserve Board invoked its emergency lending authority under Section 13(3) of the Federal Reserve Act—backed by up to $25 billion from the Treasury’s Exchange Stabilization Fund—to launch the Bank Term Funding Program (BTFP) [6]. Crucially, the BTFP allowed eligible U.S. depository institutions to borrow cash for up to one year by pledging U.S. Treasuries, agency debt, and agency MBS valued at full face value (par) rather than depressed market prices [4][6]. By enabling banks to fund deposit outflows at par without forced bond sales that crystallized mark-to-market losses, the BTFP staunched the immediate liquidity panic; by April 19, 2023, outstanding BTFP advances reached approximately $74 billion [4][6].
In the United Kingdom, where SVB UK Limited had earned £88 million in profit before tax in 2022 and held around £5.5 billion in loans and £6.7 billion in deposits, the Bank of England and HM Treasury facilitated a private-sector rescue on March 13, 2023 [7]. HSBC Holdings plc’s ring-fenced subsidiary, HSBC UK Bank plc, acquired SVB UK Limited for £1—ring-fencing British technology depositors while excluding the assets and liabilities of SVB’s failed U.S. parent [7]. Two weeks later, on March 26, 2023, the FDIC reached a purchase and assumption agreement with Raleigh-based First–Citizens Bank & Trust Company to assume all $119 billion in remaining deposits and purchase $72 billion of loans from Silicon Valley Bridge Bank, N.A., at a $16.5 billion discount, leaving roughly $90 billion in securities in receivership and an estimated $20 billion cost to the Deposit Insurance Fund [5]. The collapse of SVB—followed by First Republic Bank in May 2023—stands as a watershed episode in modern financial history, illustrating how rapid monetary tightening, unhedged duration risk, and concentrated uninsured deposits can interact to produce an instantaneous digital bank run [1][3][4].
Theoretical & Balance-Sheet Transmission Mechanism
In the Kindleberger–Minsky taxonomy of financial instability (Kindleberger, 1978; Minsky, 1986) and Irving Fisher’s (1933) debt-deflation framework, speculative asset booms become systemic crises when credit expansion shifts balance sheets from hedge finance (cash flows covering principal and interest) to speculative and Ponzi finance (relying on rising asset prices and short-term margin roll-overs).
Once monetary tightening or an exogenous shock halts price appreciation, forced margin liquidations trigger Fisherian debt-deflation: fire-sale asset discounts erode bank collateral values, contracting credit supply across the real economy.
Sources and Further Reading
- Board of Governors of the Federal Reserve System, “ Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank – Key Takeaways,” Board of Governors of the Federal Reserve System, April 2023. Central Bank / Monetary Authority
- Board of Governors of the Federal Reserve System, “ Review of the Federal Reserve’s Supervision and Regulation of Silicon Valley Bank – Evolution of Silicon Valley Bank,” Board of Governors of the Federal Reserve System, April 2023. Central Bank / Monetary Authority
- Andrew Metrick, “ The Failure of Silicon Valley Bank and the Panic of 2023,” Journal of Economic Perspectives, Vol. 38, No. 1, Winter 2024. Peer-Reviewed / Academic Research
- Erica Xuewei Jiang, Gregor Matvos, Tomasz Piskorski, and Amit Seru, “ Monetary Tightening and U.S. Bank Fragility in 2023: Mark-to-Market Losses and Uninsured Depositor Runs?,” National Bureau of Economic Research (Working Paper No. 31048), March 2023. Peer-Reviewed / Academic Research
- Martin J. Gruenberg, “ Recent Bank Failures and the Federal Regulatory Response,” Testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Federal Deposit Insurance Corporation, March 27, 2023. Official / State Archive
- U.S. Government Accountability Office, “ Bank Regulation: Preliminary Review of Agency Actions Related to March 2023 Bank Failures,” U.S. Government Accountability Office (GAO-23-106736), April 2023. Official / State Archive
- HSBC Holdings plc, “ HSBC acquires Silicon Valley Bank UK Limited,” HSBC Media Release, March 13, 2023. Historical & Financial Reference
- SVB Financial Group, “ Silicon Valley Bank Opens in Canada,” PR Newswire, March 4, 2019. Historical & Financial Reference
- Irving Fisher — "The Debt-Deflation Theory of Great Depressions," Econometrica 1, no. 4 (FRASER Federal Reserve Archive, 1933): 337–357 Central Bank / Monetary Authority
- Charles P. Kindleberger & Robert Z. Aliber — Manias, Panics, and Crashes: A History of Financial Crises (Palgrave Macmillan) Peer-Reviewed / Academic Research
Cite This Historical Dossier (APA / Chicago)
APA (7th ed.): Ç., S. (Ed.). (2026). The 2023 Silicon Valley Bank Run: Uninsured Deposits, Rate Risk, and Collapse. In Forgotten Fortunes Historical Monograph Series (Forgotten Fortunes Editorial Desk). https://forgottenfortunes.net/silicon-valley-bank-run-expansion-and-collapse/
MLA (9th ed.): Ç., Soner, ed. "The 2023 Silicon Valley Bank Run: Uninsured Deposits, Rate Risk, and Collapse." Forgotten Fortunes: Financial & Monetary History Archive, 2026, https://forgottenfortunes.net/silicon-valley-bank-run-expansion-and-collapse/.
Chicago (17th ed.): Ç., Soner, ed. "The 2023 Silicon Valley Bank Run: Uninsured Deposits, Rate Risk, and Collapse." Forgotten Fortunes Historical Monograph Series (Forgotten Fortunes Editorial Desk), August 28, 2026. https://forgottenfortunes.net/silicon-valley-bank-run-expansion-and-collapse/.
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