Silicon Valley Bank failed on March 10, 2023
Silicon Valley Bank (SVB) closed its doors on Friday, March 10, 2023, after a run on deposits that lasted just 48 hours. The bank had $209 billion in assets at the end of 2022 and served roughly 20,000 clients, mostly venture capital firms, startups, and technology companies. By the time regulators shut it down, customers had tried to withdraw $42 billion in a single day—more cash than the bank had on hand.
The failure was the second-largest bank collapse in U.S. history, after Washington Mutual in 2008. What made SVB's collapse sudden rather than slow was the speed at which depositors learned the bank was in trouble and moved their money out. On Wednesday, March 8, SVB announced a $1.8 billion loss on its investment portfolio. By Thursday morning, venture capital firms were telling their portfolio companies to move deposits elsewhere. By Friday, the bank was closed.
The Federal Deposit Insurance Corporation (FDIC) took control of SVB's assets and began the process of returning customer deposits. Most depositors with balances under $250,000 were made whole within days. Depositors with balances above that threshold—the FDIC insurance limit—faced uncertainty about how much they would recover.
Key Takeaways
- SVB failed on March 10, 2023, after customers tried to withdraw $42 billion in two days, which the bank could not pay.
- The bank had invested heavily in long-term bonds that lost value when interest rates rose, leaving it short of cash despite appearing solvent on paper.
- Deposits under $250,000 were protected by FDIC insurance and returned in full; deposits above that amount faced a recovery process.
- The U.S. government may provide all SVB deposits on March 12, 2023, meaning even uninsured depositors would recover their full balance eventually.
- SVB's collapse happened in 48 hours because news of the bank's losses spread when ready through venture capital networks, triggering a simultaneous rush to withdraw.
Why SVB ran out of cash despite having billions in assets
SVB's problem was not fraud or reckless lending. It was a mismatch between what the bank owned and what it could sell quickly. When interest rates were near zero in 2020 and 2021, SVB invested billions of customer deposits into long-term U.S. Treasury bonds and mortgage-backed securities. These were safe investments—backed by the U.S. government—but they locked the bank's money away for years.
When the Federal Reserve began raising interest rates in 2022, the value of those bonds fell sharply. A bond paying 1.5% interest becomes worth less when new bonds pay 4% or 5%. SVB still owned the bonds, but if it tried to sell them before maturity, it would have to accept a loss. On March 8, SVB announced it was selling $21 billion of these bonds at a $1.8 billion loss to raise cash.
That announcement told depositors the bank was in trouble. Within hours, venture capital firms began instructing their portfolio companies to move money out. SVB could not meet the withdrawal requests because most of its money was tied up in bonds it could not sell without losses. The bank had roughly $16 billion in cash on hand when customers tried to withdraw $42 billion.
What happened to deposits under $250,000
Deposits under $250,000 per account holder per bank were protected by FDIC insurance. When SVB closed, the FDIC took over and began paying out insured deposits. Most customers with balances under the limit received their full balance within one to three business days.
The FDIC's insurance limit applies per depositor, per bank, per account category. A person with a $200,000 checking account and a $100,000 savings account at SVB was fully insured on both accounts because each was under $250,000. A person with a $300,000 checking account was insured for $250,000 and had a claim for the remaining $50,000.
What happened to deposits over $250,000
Depositors with balances above $250,000 faced an uncertain recovery. The FDIC's standard process is to pay insured deposits first, then use the proceeds from selling the bank's assets to pay uninsured depositors a percentage of what they are owed. This process typically takes months or years, and uninsured depositors often recover only 70 to 90 cents on the dollar.
However, on Sunday, March 12, 2023—two days after SVB closed—the U.S. Treasury Department, the Federal Reserve, and the FDIC announced an emergency measure. They would may provide all SVB deposits in full, regardless of the $250,000 insurance limit. This meant that even depositors with $5 million in the bank would recover every dollar.
The government justified this decision by saying that a partial recovery for large depositors would trigger a broader banking crisis. If uninsured depositors at other regional banks thought they might lose money, they would rush to withdraw deposits, potentially causing other banks to fail. By guaranteeing all SVB deposits, regulators removed that incentive.
The timeline of SVB's collapse
| Date | Event |
|---|---|
| March 8, 2023 | SVB announces a $1.8 billion loss on bond sales and plans to raise capital. |
| March 9, 2023 | Venture capital firms tell portfolio companies to move deposits. SVB's stock falls 60% in a single day. |
| March 10, 2023 (morning) | SVB opens for business but cannot process the volume of withdrawal requests. Customers try to withdraw $42 billion. |
| March 10, 2023 (afternoon) | The FDIC closes SVB and takes control of its assets. |
| March 12, 2023 | The U.S. government guarantees all SVB deposits in full, including amounts over $250,000. |
How SVB's failure affected other banks
SVB's collapse triggered a brief panic at other regional banks. Depositors at banks with similar business models—those that held large amounts of long-term bonds and served venture capital and technology clients—began withdrawing money. First Republic Bank, Signature Bank, and several others saw large deposit outflows in the days after SVB closed.
First Republic Bank failed on May 1, 2023, after losing $102 billion in deposits. Signature Bank closed on March 12, 2023, the same day the government may provide SVB deposits. However, the broader banking system stabilized after the government's may provide, and no other major bank failures followed.
What changed after SVB's failure
SVB's collapse prompted regulators to examine how regional banks manage interest rate risk. The Federal Reserve and the Office of the Comptroller of the Currency issued guidance requiring banks to stress-test their portfolios more frequently—meaning they had to model what would happen if interest rates rose or fell sharply.
Congress also debated whether to raise the FDIC insurance limit above $250,000 for certain types of depositors, such as small business owners. No change to the insurance limit was enacted, but the debate highlighted the tension between protecting depositors and maintaining market discipline. If all deposits are insured, banks have less incentive to manage risk carefully.
Frequently Asked Questions
Did I lose money if I had a deposit at SVB?
If your balance was under $250,000, you received your full deposit. If your balance was over $250,000, you were made whole by the government's March 12 may provide, so you did not lose money either. No SVB depositor lost funds as a result of the bank's failure.
Could SVB have been saved?
SVB could have been acquired by another bank before the run began. On March 10, the FDIC facilitated the sale of SVB's assets to First Citizens BancShares for $16.3 billion. However, this happened after the bank was already closed. Once the run started, SVB did not have enough cash to meet withdrawal requests, so closure was unavoidable.
Why didn't regulators see this coming?
Regulators knew SVB held large amounts of long-term bonds and would face losses if interest rates rose. However, they did not anticipate how quickly depositors would move money out once the losses were announced. The speed of the run—$42 billion in 48 hours—was unusual. Most bank runs develop over weeks or months, giving regulators time to intervene.
Is my money safe at my bank now?
The FDIC insures deposits up to $250,000 per account holder per bank. If your balance is under that limit, your deposit is protected. If your balance is above it, your uninsured portion is at risk if the bank fails, though the government may step in as it did with SVB. You can check your bank's financial health through public filings and regulatory reports.
What is the FDIC doing differently now?
The FDIC is examining regional banks' bond portfolios more closely and requiring stress tests to show how banks would handle rising interest rates. However, the FDIC's core function—insuring deposits up to $250,000—has not changed. The insurance limit remains the same, and the process for paying out insured deposits remains the same.