20 Mar How not to be the next SVB
““How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”” These lines, from Ernest Hemingway’s The Sun Also Rises, could just as easily apply to Silicon Valley Bank (SVB) – except that SVB could have avoided its fate, if only it had prepared for a scenario where rising inflation would have eaten away at the value of its assets at precisely the same time as depositors wanted their cash. Being prepared for these two shocks and their consequences with proactive asset/liability management, together with preemptive funding plans, would have saved the bank.
How should it have gone about this? And what lessons can we learn to ensure that bank runs of the SVB sort don’t happen again? Alla Gil discusses this and more in her latest Global Association of Risk Professionals (GARP) column, which you can read here.