Silicon Valley Bank failed as a result of a perfect storm of losses, uninsured leverage, and a sizable loan portfolio, among other things (SVB). A comparison of SVB’s situation with that of other players showed that approximately 190 US banks may be vulnerable to a run.
While the collapse of SVB served as a reminder of the brittleness of the conventional financial system, recent research by economists shown that many banks are vulnerable to uninsured deposit withdrawals. It said:
“Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk.”
Bank losses can result from central banks’ monetary policies harming long-term investments like mortgages and government bonds. A bank is deemed insolvent, according to the study, if the mark-to-market value of its assets, after paying uninsured depositors, is insufficient to reimburse all insured deposits.
The viability of the banking system is threatened by the recent increase in interest rates, which reduced the asset market value of the American banking system by $2 trillion, as well as a sizable portion of uninsured deposits at some American banks.
“Recent declines in bank asset values significantly increased the fragility of the US banking system to uninsured depositors runs,” the study concluded.
President Joe Biden promised that there would be no impact on tax-paying taxpayers as the federal government intervenes to protect the depositors of SVB and Signature Bank.
Vaibhav Ali is the founder and editor of Cryptonite (cryptonite.ae), an independent digital-asset news and analysis publication with a UAE focus. He covers virtual-asset regulation — VARA, ADGM and the UAE Central Bank — alongside real-world-asset tokenization, stablecoins and agentic AI in finance. Every Cryptonite article is human-edited and its sources are linked.
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