The sudden collapse of Silicon Valley Bank (“SVB”) in March 2023 marked the second-largest bank failure in U.S. history and sent shockwaves through the financial and tech sectors. This Article offers an account of the crisis, tracing its origins to a confluence of structural weaknesses including sectoral overconcentration, poor liquidity management, deficient risk oversight, and misaligned executive incentives. SVB’s downfall—exacerbated by rapid depositor flight in a social media-fueled digital age—illustrates the fragility of modern financial institutions operating in niche markets with light regulatory oversight. Drawing on parallels with past financial crises and recent corporate governance lapses, this Article identifies key areas of regulatory and governance reform that could reduce systemic risk in the future. By situating SVB’s failure within a broader conversation on financial regulation and corporate governance, this Article aims to contribute to a forward-looking agenda for safeguarding financial stability in a rapidly evolving economic landscape.
* Professor of Law, University of Illinois College of Law. I would like to thank the participants of the 2024 Illinois Law Review Symposium on “Tech, Innovations, Banking, and the Future of Venture Capital in Silicon Valley” for helpful feedback, and Abby Milhiser and the Editors of the University of Illinois Law Review for excellent editorial assistance. All errors are my own.
The full text of this Symposium is available to download as a PDF.