Silicon Valley Bank (SVB) became the biggest lender to fail since the 2008 financial crisis. SVB’s meltdown occurred due to deteriorating business conditions in the firm’s focused customer base and a poorly timed decision to invest billions of dollars in mortgage-backed securities.
Why it matters: The bank’s failure reflects the failure of the overall industry, especially with investing in risky areas and the slow adoption of necessary technological innovations. SVB hurt its case in its refusal to modernize its technology to meet the demands of today’s business landscape, contributing to its seemingly inevitable failure.
- An ex-Silicon Valley Bank manager who worked with risk initiatives said that even though the bank paired with cutting-edge startups, it continued to be behind the curve regarding its technological capabilities.
- SVB failed to handle Payment Protection Program (PPP) funds granted to them during the Covid pandemic, leaving many companies who relied on them empty-handed.
- One CEO described the bank’s system as terrible, slow, and perhaps the “worst in the industry.” The executive had millions of dollars housed at SVB.
