Part 3/10:
The roots of SVB’s downfall stem from a series of risky financial decisions and market conditions. The bank attempted to raise additional capital and sought a buyer to prevent collapse but was unsuccessful. Stock plummeted by around 60% in one day, and regulators ultimately intervened.
A key issue was the bank’s large bond portfolio, valued at approximately $91 billion. SVB had bought mortgage-backed securities with very long durations—in particular, 97% with a 10-year horizon—yielding just 1.56%. As interest rates rose, these low-yield bonds depreciated sharply, creating substantial unrealized losses.