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IPFS News Link • Central Banks/Banking

Silicon Valley Bank imploded in a single day. It could be just the tip of the iceberg.

• Business Insider

Case in point: Silicon Valley Bank imploded in a single day after surging interest rates caused it to sell a bond portfolio at a huge loss.

The situation is an example of how low-interest-rate risk-taking can backfire as financial conditions tighten.

The market on Friday watched as regulators shut the doors at Silicon Valley Bank, capping off a speedy decline and marking the biggest bank failure since 2008.

The bank's collapse was a byproduct of the Federal Reserve's hiking of interest rates by 1,700% in less than a year. Once risk-free Treasurys started generating more attractive returns than what SVB was offering, people started withdrawing their money, and the bank needed a quick way to pay them. They were ultimately forced to sell their loan portfolio at a huge loss.