Silicon Valley Bank failed on March 10, 2023 because rising interest rates cut the value of its long-term bonds, depositors panicked, and $42 billion left in about two days. It was the third-largest bank failure in US history, and depositors were made whole after regulators stepped in on March 12.
Like many startups, we banked with SVB, and in March 2023 our own bank went down. SVB was the 16th largest bank in the United States by assets, and nearly half of US venture-backed technology and healthcare companies were financed by it. If you think your money is resting safely in your bank account, it is worth knowing exactly how a run happens.
If you do not feel like reading, you can watch the video version on YouTube.
SVB collapse timeline
| Date | What happened |
|---|---|
| Early 2022 | The Fed begins raising rates; SVB’s bond portfolio starts losing value |
| March 8, 2023 | SVB announces a sale of over $21 billion of securities at a loss and a $2.25 billion stock sale |
| March 9, 2023 | Customers withdraw $42 billion; shares plunge |
| March 10, 2023 | California regulators close SVB; the FDIC takes over |
| March 12, 2023 | Regulators guarantee all deposits; Signature Bank also closes; Fed creates Bank Term Funding Program |
| March 26, 2023 | FDIC announces First Citizens will acquire SVB’s commercial banking business |
| May 1, 2023 | First Republic Bank is seized as the crisis continues |
| March 11, 2024 | The Bank Term Funding Program expires as scheduled |
First, how banks actually work
Banks are financial institutions that help people save, borrow and spend. When you deposit money, the bank lends some of it to people and businesses or invests it in securities to earn a profit. A bank is, after all, a business, not a charitable organization.
Say you deposit $100. The bank might lend $80 to someone buying a car and keep $20 in reserve. The borrower pays interest, and that is how the bank makes money.
This is fractional reserve banking
Under fractional reserve banking, banks keep only a fraction of deposits in reserve and use the rest to make loans. When a bank makes a loan, it creates a new deposit, so the money supply grows beyond the cash the bank holds.
One update to the way this is usually taught: the US kept formal reserve requirements until 2020. In practice, a bank’s limits now come from capital rules, liquidity rules and how much it can safely lend, not a fixed reserve ratio.
It works until everyone wants their money at once
Alice and Bob each deposit $1,000. The bank keeps a small slice and uses the rest. If they both need their $1,000 back, no problem, since other customers are not withdrawing. But what if all of them withdraw at once? Then the bank is in real trouble.
To reduce that risk, the US has the FDIC, which insures deposits up to $250,000 per depositor, per ownership category, per bank. That worked well in normal times, and SVB’s problem was that about 89 percent of its deposits were above that limit.
Why rate hikes broke SVB
When wars, pandemics and supply chain problems push up inflation, central banks fight it by raising interest rates. When rates go up, borrowing gets more expensive, spending slows, and inflation cools. But there is a price to pay for everything.
Interest rates and bond values move in opposite directions. Imagine you own a bond paying a fixed 5%. If new bonds pay 6%, nobody will pay full price for yours, so its price falls. If rates drop to 4%, your 5% bond becomes more valuable.
So a bank that buys long-term bonds when rates are near zero loses money on them when rates rise rapidly. A bank can hide those losses on paper by labeling bonds “held to maturity”, where they do not flow through the income statement, but only for so long.
The maturity mismatch
If a bank’s assets are long term and its liabilities (deposits) are short term, it has promised to pay back quickly money that it invested for years. If many customers withdraw at once, it may not have enough cash and has to sell bonds at a loss.
What a bank run needs
When a lot of people take their money out at the same time, that is a bank run. Withdrawals force the bank to sell assets at a loss, losses hurt its capital, and that scares more people into withdrawing. For a run to occur, three things need to happen:
- An asset maturity mismatch
- A decline in the value of those assets
- Early withdrawals
SVB checked every box. Its deposits ballooned during the pandemic, fed by venture funding. Seeking higher returns than short-term yields offered, it bought a large amount of long-term securities from 2021, accounted for on a hold-to-maturity basis. As the Fed raised rates through 2022 and into 2023, the market value of those bonds fell sharply.
Then came March 8, 2023. SVB announced it had sold over $21 billion of securities, borrowed $15 billion and would raise $2.25 billion by selling stock. Warnings from prominent Silicon Valley investors followed, and by the next day customers had withdrawn $42 billion. On the morning of March 10, California regulators closed the bank and handed it to the FDIC.
The aftermath: regulators step in
On Sunday, March 12, the Treasury, the Fed and the FDIC announced that all SVB depositors would have access to their money on Monday. The same exception covered Signature Bank, which closed the same day. The Fed also created the Bank Term Funding Program to give other banks a source of liquidity.
It was described by some as a bailout, but the plan did not rescue the bank, its management or shareholders. It made uninsured depositors whole, with losses to the deposit insurance fund recovered through a special assessment on banks. On March 26, the FDIC announced that First Citizens BancShares would acquire SVB’s commercial banking business.
The stress did not end there. First Republic Bank was seized on May 1, 2023 after weeks of pressure. The Bank Term Funding Program expired on March 11, 2024, as scheduled. In 2025, a US Senate subcommittee released a 292-page report on the collapse that criticized the auditor’s practices.
What it means for you in 2026
The lesson is not that banks are about to fail. It is that deposits above the $250,000 FDIC limit carry real risk, that rate shocks can hurt any institution holding long-term bonds, and that speed matters: SVB’s run took roughly 36 hours, helped by mobile banking and group chats.
Practical steps: know your insured limit, spread large balances across banks or ownership categories, and understand where your bank earns its money. We are at the mercy of institutions, and knowing how the system works is the best protection. If you want more, watch our video 15 Things You Didn’t Know About the Banking Industry.
Keep reading
- Your money is not in the bank: what actually happens to a deposit
- Where does the money disappear to in a recession?: the wider economic picture
- Who gets access to cheap money: how banks and rates shape who wins
FAQ
Why did Silicon Valley Bank fail?
It held large amounts of long-term bonds that lost value as the Fed raised rates, and when it disclosed losses, depositors withdrew $42 billion in about two days.
When did SVB collapse?
California regulators closed SVB on March 10, 2023, and the FDIC took control.
Did depositors lose money?
No. Regulators guaranteed all deposits on March 12, 2023, and shareholders and certain unsecured debt holders bore the losses.
Who bought Silicon Valley Bank?
The FDIC announced on March 26, 2023 that First Citizens BancShares would acquire SVB’s commercial banking business.
How much of my money is insured?
The FDIC insures deposits up to $250,000 per depositor, per ownership category, per bank.
Could another bank run happen?
It can. The mix of unrealized bond losses, uninsured deposits and fast digital withdrawals is the same ingredient list that sank SVB, which is why the 2023 episode still matters.
How we put this list together
This article follows the public record of the March 2023 failures: regulator statements, bank filings and later reports. We note where we are giving our own opinion.
Last updated: October 2026.
