Part 8/13:
Underlying Financial Instability
The collapse also stems from structural issues within SVB’s balance sheet. The bank had to sell a significant portion of its securities—$21 billion—at a loss to raise liquidity, resulting in a $1.8 billion impairment. These "available-for-sale" securities, if sold at a loss, undermine confidence and accelerate bank runs, as depositors rush to withdraw their funds en masse.
The bank's strategy of raising $2.25 billion in equity and debt was an attempt to stem the crisis, but investor confidence had waned. Moreover, the bank’s holdings of "hold-to-maturity" securities, valued at around $91 billion, would fetch only approximately $76 billion if liquidated today—indicating substantial unrealized losses that further eroded trust.