Silicon Valley Bank Collapse: Causes & Consequences

Xuanqi Wang

doi:10.54097/s3scbn33

Authors

Xuanqi Wang

DOI:

https://doi.org/10.54097/s3scbn33

Keywords:

Silicon Valley Bank, Bankruptcy, Financial Stability.

Abstract

This paper discusses the concept of bank bankruptcy and highlights the recent failure of Silicon Valley Bank (SVB) as a significant case similar to the Lehman Brothers' collapse in 2008. Lehman's failure was attributed to the U.S. housing market collapse and internal risk management issues. SVB's failure, occurring in 2023, resulted from both internal factors (improper decisions, high-risk strategies, and poor financial management) and external factors (economic recession, Federal Reserve interest rate hikes, regulatory challenges, and changes in the tech industry). The bankruptcy of SVB has far-reaching economic impacts on depositors, borrowers, entrepreneurs, investors, and the banking industry. It triggers a crisis of confidence, liquidity pressure, and systemic risks. The Federal Reserve implements emergency measures to address the fallout, reflecting on regulatory approaches to mitigate threats to the banking system. The comparison with Lehman Brothers underscores similarities in improper development strategies, asset structures, risk management, and regulatory oversight, leading to systemic risks and undermining financial market confidence.

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