On March 10, the US Federal Deposit Insurance Corporation announced that Silicon Valley Bank (SVB) — the 16th largest bank in the US — was closed by the state’s financial regulator due to its failure in liquidity control. From 2019 to 2022, customer deposits at SVB increased from USD62bn to USD198bn and were mainly contributed by cash balances of start-up companies based in the US. According to disclosures from SVB, fixed income securities accounted for 55% of the bank’s total assets in mid Q1-2023, which were mainly US Treasury securities and securities issued by government-sponsored enterprises with average yields lower than current market yields. While this gap generated a huge unrealized loss on SVB’s assets, withdrawals of customer deposits increased as businesses sought to finance their operations amid a higher-cost environment for borrowing. On March 8, SVB said that it was under pressure to (1) sell securities at a USD1.8bn loss with an average yield of 1.79% vs the current 10Y US Treasury yield of around 3.9% and (2) raise new equity to shore up its capital, which triggered a panic among venture capital funds and led to a run on the bank. 

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