The truth behind the bankruptcy of Silicon Valley Bank.

Silicon Valley Bank, one of the major banks in the United States and the bank with the largest local deposits in Silicon Valley, faced the brink of bankruptcy due to a major crisis. This raises curiosity about the factors that led to such turmoil.

While bank bankruptcies may seem unimaginable, the underlying principle is quite simple: "Using other people's money held in one's own hands for investments, experiencing losses, and facing demands for repayment from depositors, ultimately leading to insufficient funds for repayment." This seems to be the path that Silicon Valley Bank has taken.

According to available information, "On March 8, Silicon Valley Bank announced a capital raise of $2.25 billion to offset losses from bond investments. This triggered a loss of market confidence, leading to customers withdrawing their deposits. On March 9, the parent company's stock price plummeted by 60%, marking the largest drop in over 20 years. Investors and depositors withdrew a total of $42 billion in deposits, causing the bank's cash balance to plummet to negative $958 million." This erroneous decision resulted in a financial crisis for Silicon Valley Bank, as it lost the support of cash flow. They had no choice but to sell securities to obtain the necessary funds to sustain operations.

"Later on March 9, 2023, the parent company of Silicon Valley Bank announced the sale of approximately $21 billion worth of securities from its investment portfolio, resulting in an after-tax loss of $1.8 billion for the first quarter, surprising the market. The bank also sold $1.25 billion in common stock and $500 million in convertible preferred stock." The significant sell-off of securities shocked the market, causing a sharp decline in the bank's stock and even impacting the stocks of other banks.

Just a few months before the collapse of Silicon Valley Bank, their Chief Risk Officer unexpectedly resigned and took away over $7.15 million, leaving the position vacant for eight months. Noah Baskey, a professor at the Villanova School of Business in the United States, stated, "Based on the disclosed information, there are indications that the board of directors of Silicon Valley Bank was increasingly concerned about risk. Documents show that the bank's risk committee held 18 meetings in 2022, more than double the previous year's 7 meetings. After Isuletta's departure, the committee had no chairperson and no financial risk experts." This sudden departure resulted in Silicon Valley Bank losing a critical position, and as the Federal Reserve continued to raise interest rates, the bonds invested by the bank using depositors' funds continued to depreciate, effectively increasing their financing costs.

Despite these challenges, Silicon Valley Bank announced its bankruptcy on March 10 and was taken over by the Federal Deposit Insurance Corporation (FDIC). This marked the second-largest bank failure in U.S. history, highlighting mismanagement, internal disarray, and a failure to timely respond to societal changes, leading to the current dire situation.