Silicon Valley Bank failed on March 10, 2023, after depositors withdrew a reported $42 billion in a single day, the fastest bank run in U.S. history at that point and the second-largest bank failure on record after Washington Mutual in 2008. The bank, which specialized in serving startups and venture capital firms and held deposits from a large share of Silicon Valley's technology companies, had invested a substantial portion of its rapidly grown deposit base in long-dated Treasury and mortgage-backed securities during 2020 and 2021, when rates were near zero.
The mechanism was a textbook duration mismatch that the 2022 rate-hiking cycle turned lethal: as the Federal Reserve raised rates through 2022, the market value of SVB's long-term bond holdings fell sharply, producing billions in unrealized losses that the bank had not needed to recognize under accounting rules as long as it held the bonds to maturity. When the bank announced on March 8 that it had sold a portion of that portfolio at a $1.8 billion loss and needed to raise capital, prominent venture firms including Peter Thiel's Founders Fund reportedly advised portfolio companies to withdraw funds, triggering the run.
SVB's depositor base was unusually concentrated: roughly 97 percent of its deposits exceeded the FDIC's $250,000 insurance limit, meaning uninsured startup treasuries — often representing a company's entire operating runway — faced potential total loss, a fact that accelerated withdrawals once doubt set in. Signature Bank, with heavy cryptocurrency-industry exposure, failed days later under similar contagion dynamics, and First Republic Bank, serving a similarly concentrated wealthy-client and tech-adjacent base, failed in May 2023 after a slower-motion version of the same run.
Federal regulators invoked a systemic risk exception over that weekend, guaranteeing all deposits at SVB and Signature Bank — including amounts far above the insurance limit — to prevent broader contagion across regional banks, while explicitly protecting shareholders and unsecured bondholders from any bailout. The Fed simultaneously created the Bank Term Funding Program, letting banks borrow against underwater bond holdings at face value rather than market value, addressing the exact duration-mismatch vulnerability that had sunk SVB.
Coverage in the days after the collapse emphasized the drama of the run itself and warnings that startups would miss payroll. It underweighted the supervisory failure underneath: SVB had grown from roughly $70 billion to over $200 billion in assets between 2019 and 2022 without triggering enhanced regulatory scrutiny that larger banks face, partly a result of 2018 rollbacks to Dodd-Frank oversight thresholds that had raised the asset level requiring stricter stress testing.
The Federal Reserve's own internal review, published in April 2023, concluded that supervisors had identified SVB's interest-rate risk and internal control problems well before the failure but had not escalated enforcement quickly enough given the bank's growth rate — a finding that shaped subsequent debate over regional bank capital and liquidity rules. Regional banks broadly saw deposit outflows and tighter lending standards in the following year as the episode reset how much duration risk depositors and examiners alike were willing to tolerate.
SVB's failure — duration risk on bond portfolios plus a concentrated, social-media-amplified depositor run — was the largest U.S. bank collapse since 2008. Signature Bank followed; Credit Suisse required a shotgun Swiss rescue. Startups learned treasury management the hard way.
Emergency facilities and temporary unlimited deposit coverage for affected banks stopped wider contagion. Supervision of interest-rate risk and uninsured deposit concentrations tightened. The episode proved that digital banking makes nineteenth-century runs happen at group-chat speed.
Founders diversified banking relationships overnight; CFOs rediscovered duration. Regulators debated whether tech deposit bases are uniquely runnable. The failure’s lesson is temporal: interest-rate risk plus group chat equals nineteenth-century panic on fiber.
Treasury strategies that chased yield without liquidity buffers became cautionary slides in every startup finance deck. Contagion stopped; complacency about rate risk did not earn a sequel permission slip.
The lasting inheritance runs through both venture-industry behavior — startups now routinely split treasury deposits across multiple banks and sweep excess cash into money-market instruments rather than concentrating deposits at a single relationship bank — and regulatory posture, with the 2018 rollback of enhanced oversight thresholds for midsize banks becoming a central reference point in later debates over whether banking regulation had been loosened too far for institutions of SVB's size.
Century Signals note: Fed/FDIC SVB review reports; contemporaneous run coverage; emergency-facility announcements. Editorial judgment about what still structures the present — not a comprehensive history.