The Risks of Interest Rate Risk for a Bank

Silicon Valley Bank would have been seen as very safe credit risk-wise because a majority of their assets were held in government treasuries. But when interest rates increase, simultaneously the value of these treasuries is going to decrease and at the same time depositors on the liability side are going to ask for higher and higher interest rates. At some point actually the bank with only treasuries might fail because the interest it has to serve to the depositors are actually higher than the revenues it gets fromTreasury.