Silicon Valley Bank's Collapse: What It Means for Your Money

Reese Marlowe in Business & Economy December 2025 • 4 min read.

"Uncover the hidden vulnerabilities exposed by the SVB crisis and how they could impact your financial health."

In March 2023, the financial world was rocked by the sudden collapse of Silicon Valley Bank (SVB). As the sixteenth-largest bank in the United States, SVB's failure sent shockwaves through the market, sparking fears of contagion and raising questions about the stability of the banking system. This event not only marked the largest bank failure since the 2008 Global Financial Crisis but also highlighted the critical importance of understanding the underlying vulnerabilities that can lead to such dramatic collapses.

SVB’s downfall wasn't just a story of numbers and balance sheets; it was a wake-up call. The bank's heavy reliance on uninsured deposits, coupled with significant unrealized losses on its held-to-maturity securities, created a perfect storm. As interest rates rose, the value of these securities declined, and when depositors began to withdraw their funds, SVB was forced to sell assets at a loss, triggering a bank run and ultimately, its demise.

But what does this mean for you? The SVB crisis exposed weaknesses in the banking system that could affect individuals and businesses alike. Understanding the factors that contributed to SVB’s failure can help you make informed decisions about where to keep your money and how to manage your financial risks.

What Were the Key Vulnerabilities That Led to SVB's Collapse?

House of cards collapsing representing the SVB bank failure and financial turmoil.

Several factors combined to create the conditions for SVB’s failure. These vulnerabilities weren't necessarily unique to SVB, which means they could pose risks to other financial institutions as well.

Here are some of the critical weaknesses that contributed to the crisis:

Uninsured Deposits: A significant portion of SVB’s deposits were uninsured, meaning they exceeded the $250,000 limit covered by the Federal Deposit Insurance Corporation (FDIC). This made depositors more likely to panic and withdraw their funds quickly, accelerating the bank run.
Unrealized Losses on Held-to-Maturity (HTM) Securities: SVB held a large portfolio of HTM securities, which are not marked to market on a regular basis. As interest rates rose, the value of these securities declined, creating substantial unrealized losses. When SVB was forced to sell these securities to meet withdrawal demands, these losses became real, further eroding confidence in the bank.
Bank Size and Regulation: SVB's size placed it in a precarious position regarding regulatory oversight. It had previously been designated as systemically important, but faced relaxed regulations after the 2018 regulatory rollback. This meant it wasn't subject to the same level of scrutiny as larger banks.
Cash Holdings: Banks with more cash holdings were more resilient to the stress.

The interplay of these vulnerabilities created a domino effect. Concerns about unrealized losses led to deposit withdrawals, which forced SVB to sell assets at a loss, further fueling the panic and leading to the bank’s ultimate failure.

What Can We Learn from the SVB Collapse?

The SVB crisis offers valuable lessons for policymakers, financial institutions, and individuals alike. It underscores the importance of robust regulatory oversight, particularly for banks with significant concentrations of uninsured deposits and large holdings of HTM securities. It also highlights the need for banks to carefully manage interest rate risk and maintain adequate liquidity to meet potential deposit outflows. For individuals, the SVB collapse serves as a reminder to understand the risks associated with uninsured deposits and to diversify their financial holdings.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2308.06642,

Title: Contagion Effects Of The Silicon Valley Bank Run

Subject: econ.gn q-fin.ec q-fin.gn

Authors: Dong Beom Choi, Paul Goldsmith-Pinkham, Tanju Yorulmazer

Published: 12-08-2023

Everything You Need To Know

What were the primary causes that led to the failure of Silicon Valley Bank (SVB)?

The collapse of Silicon Valley Bank (SVB) was primarily caused by a combination of vulnerabilities. A significant portion of SVB's deposits were uninsured, exceeding the $250,000 limit covered by the Federal Deposit Insurance Corporation (FDIC), which made depositors more prone to panic and withdraw their funds rapidly. SVB held a large portfolio of Held-to-Maturity (HTM) securities, which declined in value as interest rates rose, creating substantial unrealized losses. When SVB was forced to sell these securities to meet withdrawal demands, these losses became real, further eroding confidence. Additionally, relaxed regulations and inadequate cash holdings contributed to its precarious position.

How did the reliance on Uninsured Deposits contribute to the SVB crisis?

A significant portion of SVB's deposits were uninsured, meaning they exceeded the $250,000 limit insured by the Federal Deposit Insurance Corporation (FDIC). This lack of insurance made depositors more likely to panic and withdraw their funds quickly when concerns about the bank's financial health arose. This rapid withdrawal of funds, known as a bank run, put immense pressure on SVB, forcing it to sell assets at a loss and ultimately contributing to its collapse.

What are Held-to-Maturity (HTM) securities, and how did they play a role in SVB's downfall?

Held-to-Maturity (HTM) securities are debt instruments that a bank intends to hold until their maturity date. SVB held a large portfolio of these securities. As interest rates rose, the value of these HTM securities declined, leading to substantial unrealized losses. Because these securities were not marked to market regularly, the extent of these losses wasn't immediately apparent. However, when SVB was forced to sell these securities to meet the demands of depositors withdrawing their funds, these unrealized losses became real, eroding the bank's capital and fueling the crisis.

Why is the size of a bank and its regulatory oversight so important, as demonstrated by the SVB collapse?

SVB's size and the level of regulatory oversight it faced were crucial factors in its failure. Despite being the sixteenth-largest bank in the United States, SVB had faced relaxed regulations after the 2018 regulatory rollback. This meant it wasn't subject to the same level of scrutiny as larger banks. The absence of stringent oversight allowed vulnerabilities, such as the concentration of uninsured deposits and the holding of HTM securities, to accumulate unchecked, ultimately contributing to its collapse. This highlights the importance of robust regulatory oversight, especially for banks with significant risk factors.

What lessons can individuals learn from the Silicon Valley Bank (SVB) crisis to protect their money?

The SVB collapse offers valuable lessons for individuals. Firstly, it underscores the importance of understanding the risks associated with uninsured deposits. Individuals should be aware of the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 and consider diversifying their deposits across multiple banks to ensure their funds are fully insured. Secondly, the crisis highlights the need to diversify financial holdings, including investments. By spreading investments across different asset classes, individuals can reduce their exposure to the risks associated with any single financial institution or market. Finally, understanding the factors that contributed to SVB's failure, such as rising interest rates and the value of Held-to-Maturity (HTM) securities, can help individuals make more informed decisions about where to keep their money and manage their financial risks.