Silicon Valley Bank’s failure is predictable – what can we learn from it?

The collapse of SVB highlights deep failures in the conduct of regulatory and monetary policy

• Live coverage of Silicon Valley Bank collapse
• Global banking shares slide as SVB fallout spreads
• Why did it collapse and is this the start of a banking crisis?

The run on Silicon Valley Bank – on which nearly half of all venture-backed tech startups in the US depend – is in part a rerun of a familiar story, but it’s more than that. Once again, economic policy and financial regulation has proven inadequate.

The news about the second-biggest bank failure in US history came just days after the Federal Reserve chair, Jerome Powell, assured Congress that the financial condition of America’s banks was sound. But the timing should not be surprising. Given the large and rapid increases in interest rates Powell engineered – probably the most significant since former Fed chair Paul Volcker’s interest-rate hikes of 40 years ago – it was predicted that dramatic movements in the prices of financial assets would cause trauma somewhere in the financial system.

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