1. Silicon Valley Bank (SVB) had a high Deposit Loan Ratio (DLP) of 87%, which increased its risk of liquidity issues.
2. SVB had a Net Interest Margin (NIM) of 4%, indicating it was highly profitable before its collapse.
3. A low Capital Adequacy Ratio (CAR) of 11% made SVB vulnerable to financial stress.
4. SVB had sufficient liquid assets to meet all depositor withdrawals, which prevented a bank run.
5. Rising interest rates caused significant losses in SVB's bond portfolio, contributing to its failure.
6. SVB had a significant number of uninsured deposits, which increased the likelihood of a bank run.
7. SVB's high DLP meant that it lent out almost all of its deposits, leaving little liquidity.
8. SVB's failure was a result of poor risk management and insufficient capital buffers to handle financial shocks.
9. The FDIC protected all SVB's depositors, including those with uninsured deposits, after the bank collapsed.
10. The primary reason for SVB's collapse was a bank run, triggered by a loss of depositor confidence.
11. SVB released a financial statement showing significant losses just before rumors about its troubles spread.
12. SVB's customer base consisted primarily of small retail depositors.
13. Many of SVB's depositors were large businesses that had accumulated large cash reserves during the COVID-19 pandemic.
14. When depositors heard rumors about SVB's financial troubles, they rushed to withdraw their money, worsening the liquidity crisis.
15. SVB sold a large portion of its bond portfolio at a loss, leading to a further decline in its financial position.
16. Rising interest rates decreased the value of SVB's long-term bond investments, contributing to its financial instability.
17. SVB had diversified its investments across multiple asset classes to minimize risk, which helped mitigate the impact of interest rate hikes.
18. SVB failed to hedge against rising interest rates, which caused substantial losses in its bond portfolio.
19. Many of SVB’s clients were uninsured depositors, which contributed to the panic and bank run after rumors spread about the bank’s health.
20. SVB's reliance on short-term funding for long-term investments made it especially vulnerable to interest rate hikes.