1. Why did a bank fail after buying safe government bonds?

A bank does not have to lend to risky companies to fail.

At SVB, falling long-term securities prices coincided with deposit withdrawals.

Safe assets and cash available for immediate repayment are different things.

2. Deposits arrived quickly, but the money was tied up for longer

During the low-rate period, funds raised by startups flowed into SVB.

The bank invested a substantial share of those deposits in long-term Treasury and mortgage-backed securities, among other assets.

The timing mattered: customers could withdraw quickly, while the investments had long maturities.

3. As rates rose, existing bond prices fell

When newly issued bonds offer higher yields, existing bonds paying lower interest become less attractive in the market.

Even government bonds can produce a loss if sold before maturity.

Low default risk does not mean that the market price cannot fall.

4. Meanwhile, customers needed cash too

As startup funding conditions weakened, customers withdrew deposits to finance their operations.

SVB faced two pressures: the value of its bond holdings fell, while it needed cash to repay depositors.

Even if the bank wanted to wait for maturity, withdrawals would not wait.

5. Disclosed losses heightened anxiety, and withdrawals surged

On 2023/03/08, SVB announced securities-sale losses and a capital-raising plan.

Deposit withdrawals surged the next day, and the bank was closed on 03/10.

When many depositors withdraw out of concern, a bank's cash shortfall can intensify rapidly.

6. High rates test not just assets, but how long a bank can hold on

ASSETCASTING interpretation

SVB's failure cannot be explained by rising rates alone. Customer concentration, weak risk management and supervisory failures also contributed.

Ask not only what assets are held, but whether cash can be made available when customers need repayment.

Event facts are based on the cited Federal Reserve review. The final lesson is ASSETCASTING's interpretation, not the regulator's investment advice. The Korean artwork is accompanied by English text descriptions.

Federal Reserve — Review of SVB: Executive Summary (2023)

Federal Reserve — Evolution of Silicon Valley Bank (2023)

SVB shows how falling long-term bond prices and deposit withdrawals can interact, and why credit safety differs from interest-rate and liquidity risk.

SVB's 2023 failure: why safe assets did not mean available cash

Sources

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