Part 4/10:
When depositor withdrawals accelerated—driven by fears of insolvency—the bank faced a liquidity crisis. To meet withdrawal demands, SVB was forced to sell bonds at significant losses, further impairing its financial health. The problem was compounded because many of these mortgage-backed securities could not be liquidated quickly or without losses, igniting a potentially dangerous cycle.
Broader Banking Sector Vulnerabilities
SVB’s crisis is not isolated. Other banks, such as First Republic, have seen their stocks plunge—down over 50% at one point—highlighting the fragility in the sector. Many banks hold similar bond portfolios, with low-yield securities locked in at unfavorable interest rates, raising fears that more institutions could face comparable struggles.