On March 10, banking regulators closed Silicon Valley Bank (SVB), and two days later they closed Signature Bank. This set off a wave of uncertainty among individual depositors and business clients. While the FDIC, Treasury, and Federal Reserve stepped in to protect depositors and their holdings, questions linger about how and why SVB collapsed so quickly.
Below are a few resources (news articles, blog posts, Twitter threads, and podcasts) that I have found helpful in piecing together what led to these closures, how the bank failures impact the broader economy, and what business owners can do to put themselves in a more secure financial position moving forward.
What happened at SVB and Signature Bank?
Morning Brew Daily Twitter thread: The morning that SVB was closed by regulators, Morning Brew explained how SVB got into this position, and the significant impact since SVB played a large and unique role in providing banking services to startups and small businesses.
Joseph Politano, Apricitas.io: For a longer, data-driven deep dive on this topic, Joseph Politano’s got you covered. His post highlights how SVB’s mix of assets made it vulnerable to a rapid increase in interest rates.
The Indicator, NPR’s Planet Money: For those interested in a short (nine minute!) podcast, The Indicator by Planet Money does a great job of laying out both of these bank failures, and why it was important that regulators acted quickly so that depositors could regain access to insured funds.
What do these bank failures mean for interest rates?
Abha Bhattarai, Washington Post: Abha Bhattarai, an economics correspondent for The Washington Post, explains how the Federal Reserve’s campaign to cool the economy by raising interest rates impacted the value of SVB’s assets—and notes that many banks may be facing similar losses.
Jeanna Smialek, New York Times: Jeanna Smialek, Federal Reserve and economics reporter, suggests that the most important factor determining the economy right now is the Federal Reserve’s action to cool inflation by quickly raising interest rates. She notes that policymakers must now balance their desire to bring down inflation further with new evidence that their rake hikes are starting to have an impact.
Scott Horsley, NPR: On Wednesday, the Federal Reserve opted to raise its benchmark interest rate by one-quarter of a percentage point, even though many expected it to hold rates steady after the SVB and Signature Bank closures. As Scott Horsley summarizes, this action signals the Fed’s continued desire to cool rising prices despite the recent stress in the financial system.
What should business owners do going forward?
S. Mitra Kalita, Time Magazine: Hemant Taneja, CEO of the venture capital firm General Catalyst (and Gusto board member), recommends that small and medium businesses (SMBs) diversify their banking relationships to two or three banks depending on the SMB size—and to diversify across a range of small and large banks.
Paolo Confino, Fortune: Confino makes the point that, just as it is important for small business owners to evaluate banking partners, they also should make sure that their payroll providers have resilient operations in order to avoid missed payments.
Sarah O’Brien, CNBC: What actions should small business owners—including those who did not bank with SVB—do to reduce risk? This CNBC article nicely lays out the basics of FDIC insurance and how to assess the security of new banks.
