Silicon Valley Bank's Collapse: A 72-Hour Anatomy of a Modern Bank Run

On the morning of March 8, 2023, Silicon Valley Bank was a well-known, mid-sized lender to the technology and venture-capital industry announcing a routine-sounding capital raise. By the afternoon of March 10, it had been seized by California regulators and placed into FDIC receivership, the second-largest bank failure in US history at the time. March 8 was a trigger, not the origin of the problem, the vulnerability behind it had been building for two years, and the speed of the collapse once it was exposed is what makes this a useful case study in how a bank run spreads in an era of instant transfers and group chats.

The two-year buildup. SVB's deposits nearly tripled between the end of 2018 and the end of 2021, growing far faster than the rest of the banking industry, driven by venture-backed client companies flush with cash from a boom in IPOs and funding rounds. SVB invested a large share of those deposits in long-dated mortgage-backed securities, by the end of 2022 held-to-maturity securities made up 78 percent of its securities portfolio, well above the peer-bank average, with an average duration over six years. That worked while rates stayed low. As the Fed raised rates through 2022, those securities lost significant market value. Held-to-maturity accounting meant those unrealized losses didn't flow through SVB's reported earnings, but they were real, disclosed in its financial statements, and became relevant the moment the bank needed to sell rather than hold. At the same time, the venture-funding boom that had produced the deposit surge reversed, startups began drawing down their cash balances faster than new deposits came in, and roughly 94 percent of SVB's deposits sat above the $250,000 insured limit, a client base with both the means and the incentive to move fast at the first sign of trouble.

March 8: the trigger. As deposit outflows built, SVB sold roughly $21 billion of its available-for-sale securities at a $1.8 billion loss and announced plans to raise $2.25 billion in new capital. Moody's downgraded the bank's credit rating the same day. Individually, a bank raising capital after bond losses wasn't unheard of in that rate environment, but the combination, a crystallized loss, an urgent capital raise, and a same-day downgrade, read as a bank confirming the market's worst assumptions about what was sitting on its balance sheet.

March 9: the run begins, and it's fast. Prominent venture-capital firms, including Founders Fund, Union Square Ventures, and Coatue Management, advised portfolio companies to withdraw their deposits from SVB. Because SVB's client base was heavily concentrated among startups with large, uninsured deposits and close, fast-moving communication networks with each other, the advice spread quickly. Customers withdrew a reported $42 billion from the bank by the end of that single trading day, leaving SVB with a negative cash balance of roughly $958 million.

March 9, continued: the stock collapses. SVB's shares fell roughly 60 percent on March 9 as the scale of the withdrawals became apparent, another visible signal of distress landing while withdrawal requests were already accelerating.

March 10: seizure. California's Department of Financial Protection and Innovation closed SVB and appointed the FDIC as receiver. Regulators later indicated an additional $100 billion in withdrawals had been expected that day had the bank remained open, on top of the $42 billion already gone the day before. SVB's stock was halted from trading.

March 12: the response widens. New York regulators closed Signature Bank, a separate institution facing its own deposit flight, citing systemic risk. The US Treasury, Federal Reserve, and FDIC jointly announced a systemic risk exception, guaranteeing depositors at both SVB and Signature Bank access to their full deposits, including the portion above the standard $250,000 insurance limit, and the Federal Reserve created the Bank Term Funding Program, a new facility letting banks borrow against the face value of their government-backed securities rather than a depressed market value, aimed at preventing other banks from facing the same forced-loss dynamic that had hit SVB.

March 13: contagion, contained but visible. SVB reopened as a bridge bank under FDIC control, and HSBC agreed to acquire its UK subsidiary for a nominal £1. Even with the deposit guarantee already announced, the broader concern didn't disappear: US bank stocks had lost a combined $100 billion in market capitalization over March 9 and 10 alone, and European bank stocks roughly $50 billion, a sign the market's worry had moved beyond SVB specifically to a broader question about unrealized losses sitting on other banks' balance sheets. First Republic Bank, which shared some of SVB's characteristics, a concentration of large uninsured deposits among a wealthy client base, came under sustained pressure in the weeks that followed and was ultimately acquired by JPMorgan Chase in an FDIC-brokered deal in May 2023.

Why this run moved faster than the bank runs of 2008. SVB's deposit base was unusually concentrated, both in industry, startups and venture funds, and in balance size, a large share of accounts held far more than the $250,000 insured limit, giving depositors a direct financial incentive to move fast once doubt set in. Electronic transfers were nothing new by 2023, but the combination of an unusually concentrated, well-networked depositor base and instant transfers meant the same message reached most of the affected client base within hours rather than days, and each recipient could act on it immediately rather than waiting to visit a branch.