Let SVB burn


Kroll has a succinct take on Silicon Valley Bank.

It has been a long time since we’ve had to face a bank run, but in many ways Silicon Valley Bank (SVB) was a special case. SVB’s client base and funding structure both suggest that it is unlikely to trigger a systemic crisis. There may be some contagion to other small, community banks in the U.S.—particularly if depositors aren’t all made whole–but the larger banks are unlikely to follow in SVB’s footsteps. SVB is yet another example that we can expect market disruptions as central banks raise rates and shrink their balance sheets.

SVB specializes in providing banking services to technology-related start-ups. For years as interest rates were at the zero lower bound, these tech start-ups had cash coming in by the truck load from “liquidity events” such as IPOs, secondary offerings, SPAC fundraising, venture capital investments and acquisitions. Many of them deposited their cash at SVB.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.