Understanding How a Bank can Fail

This past week, Silicon Valley Bank (SVB) was closed by banking regulators. Let’s understand the basics of how this happened and why it matters to the tech industry.

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SHOW NOTES:

HOW CAN A BANK WITH SO MUCH MONEY SHUT DOWN?

Banks never hold all the money that they have on the books as deposits
Banks manage a portfolio of investments
Banks try and manage the portfolio within certain ratios
Banks have regulations

LEVERAGE, INTEREST RATES, RISK, TIMELINES, COMMUNICATIONS and PANICS

Basics Part I - Systems built on Trust, Regulations to Enforce Actions
Basics Part II - What is SVB?, Deposits vs. Investments, Leverage, Interest Rates
Higher interest rates increases the risk of existing investments
Valuations vs. Valuations on Paper
Insurance, Diversified Portfolio
Cloud Analogies - Single vs. Multi-Cloud, Shared Resources Risks, Profitability of a Service, Best Practices vs. Practicality, Rising Costs (or Shortages)

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