Consequences of Government Bonds Preferential Treatment in Bank’s Balance Statements, Exemplified By the Collapse of Silicon Valley Bank

Abstract

The new lesson for banking sector came on March 10th 2023, when the bank, which had $212bn of assets, failed with spectacular speed, making it the biggest lender to collapse since the global financial crisis of 2007–2009. By loading up on long-term bonds, Silicon Valley Bank (SVB) had taken an enormous unhedged bet on interest rates staying low. That bet went wrong, leaving the bank insolvent.

Keywords

• government bonds
• preferential treatment
• bank’s balance statement
• collapse
• silicon valley bank
• consequences