Silicon Valley Bank: A Tale of Hubris, Risk, Forbearance, and Failure

Authors
Allan Brunner, AnaMaria Conley, Zach Ebbott, Everett Renberg
Region
North America
Topic
Accounting & Finance
Ethics & Social Justice
Length
13 pages
Keywords
banking
Bank Management
Bank Crises
Banking Regulation
Federal Reserve Policy
Stress Testing
Copyright Holder
Society for Case Research
Student Price
$4.00
Target Audience
Faculty/Researchers
Graduate Students
Undergraduate Students

This case study describes several factors that contributed to the demise of Silicon Valley Bank. The bank took on substantial risks and did not take the necessary precautions to hedge those risks. Changes in bank regulations and a delay in implementing those regulations allowed SVB to operate mostly unchecked, even as it grew very rapidly and increased its risk-taking. When the Federal Reserve Bank did provide notices of concern, senior management failed to take those warnings seriously. Finally, the Fed’s regulatory response to SVB was rather lackluster. 

Learning Outcomes

After completing this assignment, students should be able to:

  1. Identify, describe, and assess risks engendered by a particular structure of assets and liabilities.
  2. Assess the interest rate risk of available-for-sale securities using basic duration analysis.
  3. Assess a bank’s liquidity risk using the liquidity coverage ratio.
  4. Evaluate the strengths and weaknesses of a bank’s corporate governance structure.
  5. Evaluate the regulatory response to a bank’s excessive risk-taking.