In-depth Analysis of the Factors Leading to the Demise of Silicon Valley Bank and the Subsequent Effects on the Financial Landscape

Abstract

Silicon Valley Bank of the United States filed for bankruptcy in March 2023, the largest bank bankruptcy in US history and the quickest bank bankruptcy process ever. This bank's run-on liquidity risk exposure led to the bank's declaration of bankruptcy. This paper takes the cause of the failure of Silicon Valley Bank as the research theme, adopting the method of case analysis, and analyzing the business model, operation data, monetary and regulatory policies of the United States in the corresponding period. This paper finds that the risk factors of the failure of Silicon Valley Bank mainly include the risk of a single business structure, the risk of interest rate and liquidity management, the risk of monetary policy of the Federal Reserve and the risk of financial supervision system. Among them, business model defects and poor asset and liability management are the endogenous risks of Silicon Valley Bank failure, and the US monetary policy and regulatory policy errors are the inducing risks of Silicon Valley Bank failure. Commercial banks and financial regulators should take the case of Silicon Valley Bank failure as a reference to improve the ability of banks to prevent and resolve operational risks.