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Interest rate risk and bank stability: insights from the 2023 banking crisis and the collapse of Silicon Valley Bank
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Resumo(s)
Risk management failure, a high percentage of uninsured deposits, and significant exposure to
long-term, low-yield bonds amid rapid Federal Reserve interest hikes triggered the collapse of
Silicon Valley Bank (SVB). Rapid deposit inflows during the low-interest-rate environment
caused SVB to expand its long-term bond holdings, which suffered heavy devaluation as rates
increased. Simultaneously, reduced venture capital activity slowed deposit inflows, while
corporate clients withdrew funds in search of higher returns. This research investigates the
interplay between interest rates, bond valuation, and liquidity pressures, emphasizing the
critical role of asset-liability mismatches, concentrated depositor bases, and inadequate
hedging in SVB’s failure.
Descrição
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Silicon Valley Bank (SVB) Interest rates Long-term bonds Asset-liability management Duration mismatch Uninsured deposits Yield curve Bank failure