Warning Signals About Silicon Valley Bank Were All Around US

Silicon Valley Bank’s demise has led many pundits to blame rising interest rates, panicked depositors, bank regulators, and rating agencies. Rising rates are inanimate actors, and depositors, regulators, and rating agencies do not run banks. SVB’s
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Chief Executive Officer Greg Becker, his team, and the bank’s Board of Directors are responsible for this colossal failure, which now not only leaves numerous depositors without their money but is likely to lead to significant layoffs at companies who had their money at SVB.

Significant asset size growth, reliance on largely homogeneous depositors, as well as concentrations in investments and in liabilities were signaling trouble at SVB since at least 2019. Banks are opaque institutions. Anyone analyzing a bank needs countless hours, not only to analyze financial disclosures, but also Basel III disclosures, which are focused on risk. And by the time any of us see their financials, that information is already old because financials are usually published several weeks after the quarter ends. Yet, even looking at aggregated data about SVB, a number of signs would have told investors, lenders, and credit analysts that SVB had problems.