The Collapse of Silicon Valley Bank: Why Prudent Risk Management Matters

The Collapse of Silicon Valley Bank: Why Prudent Risk Management Matters

This IDC Perspective examines the failure of Silicon Valley Bank in the U.S. and its U.K. subsidiary, including the macroeconomic and regulatory causes. The rise in U.S. interest rates had a severe impact on the composition of the bank's assets. As rates increased, clients in the technology industry started to get into financial trouble and needed cash to limit liabilities. Many began to withdraw funds from their accounts. SVB thus had to sell a substantial amount of its bond portfolio, exposing it to price decline and leading to losses. Trading of bank shares was halted and the bank was taken over by regulators and subsequently sold."Without adhering to a proper balance sheet and liquidity management methodology, a relatively minor shift in market risk can wipe out an entire bank and put it into recovery." — Research Director George Briford, IDC Financial Services Insights

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