Silicon Valley Bank’s March 10th Collapse Prompts Historical Inquiry into Bank Failures, Yielding Fascinating Results

On March 10, 2023, in the second largest bank failure in US history, Silicon Valley Bank collapsed. The Federal Deposit Insurance Corp. stated that it has taken control of the bank via a newly created entity called the Deposit Insurance National Bank of Santa Clara.

A historical examination of the number of U.S. bank and thrift failures compared to the Federal Funds effective rate yields surprising results. Interestingly, elevated US bank and thrift failures tend to correspond to periods in which rates are tapered down to lower levels, not during the rate hike segment of the interest rate cycle that is often associated with duress in the equity markets.