Silicon Valley Bank – What is going on?
Before we look at the situation globally, it is worth pointing out how specific Silicon Valley Bank is and how the bank grew after Covid.
Deposits went from $61bn in Q4 2019 to $189bn in Q4 2021. This additional money was mostly used to double the size of the loan book to $66bn but also to increase the held to maturity (HTM) bond portfolio from $13.5bn in Q4 2019 to … $99bn in Q4 2021! This was done close to the top of the market, mostly with 10+ year ABS.
As banking history has repeatedly shown, exponential growth is rarely a good idea in banking, and this proved to be no exception.