What happened at SVB is so sudden and shocking that caused the the FDIC to promptly swooped in and seized the bank’s assets almost in an instant. But, what is a bank run?

A bank run is an event that even the largest of all financial institutions fear. It occurs when many depositors rush to withdraw their savings within a very short span of time. This usually happens when trust in the bank’s financial health has been broken.

To be fair to SVB, they did not invest in risky assets, but rather safe long term Treasuries. The only problem, a timing problem we would opine, is that those Treasuries and government-backed mortgage securities were bought in a low-interest rate environment. But, now as interest rates have sky-rocketed, the yield on those bonds are lower than what anyone could have received from a regular saving account. This basically created a dent in the market value of the “safe” assets. 

The SVB bank run started when they announced they had to sell their securities at a loss in order to fund withdrawals, etc. This led to a crisis of confidence. In what ensued in the next two days, billions in deposits were withdrawn and this led to a classic bank run for SVB. On Friday, the FDIC came in and seized all of SVB’s assets.

Scary stuff and materials made for a short Netflix documentary, isn’t it? In volatile times like these and punctuated by such “black swan” events, it necessitates the need for intelligent trading. After all, since we do not know what is going to happen, we might as well trade based on market data using a stock trading bot. As the oracle always says “Data does not lie”.