Silicon Valley Bank and the Changing Structure of Banking

Starting in March 2023, the U.S. banking sector experienced the failure of several major banks, and the entire industry was threatened with a crisis. Rising interest rates over the previous two years had diminished the value of banks’ assets, as they typically borrow short term and lend or invest long term at fixed rates. But most banks have stable funding from deposits on which they have historically been able to pay low rates even when market interest rates rise, so that the losses in as