Not just SVB. There have been 564 bank failures since 2000.

By Pranshu Maheshwari

One way to measure the magnitude of a bank's failure is by the amount of assets the bank held. At the time it failed, SVB's collapse was the second largest American bank failure of all time, and the largest since 2008.

Soon after SVB's failure, First Republic Bank failed and took SVB's spot as the 2nd largest bank failure.

The vast majority of failures since 2000 have been smaller regional banks.

SVB and FRB are the 2nd and 3rd largest American bank failures.

Bank failures, by value of assets

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Source: FDIC. Built on

Small banks can be more susceptible to failure. Their assets are usually more concentrated and they don't have the same access to funding as larger banks. When customers rush to withdraw their money en-masse, a bank needs to sell its assets or raise funding to enable the withdrawals.

When a bank can't meet obligations, such as withdrawals by customers, regulators step in to shut down the bank. This sort of bank failure is reasonably common; SVB is the 562nd failure since Oct 2000. Periods of financial crises spark more bank failures, but banks fail even in "normal" times.

Several banks failed during the Great Financial Crisis.

Failed banks over time, since Oct 2000

Source: FDIC. Built on

Surprisingly, the Great Financial Crisis wasn't the worst of it. Bank failures were very common in the 1980s, with almost 30% of all banks failing. The Savings and Loans crisis of the 80s happened as the Fed aggressively raised interest rates. Rising rates lead to lower asset prices, and small banks were hit hard.

After a bank failure in the US, the Federal Deposit Insurance Corporation (FDIC) steps in as the receiver of the failed bank's assets. The FDIC typically takes over the bank's operations, works to sell off its assets, and use the proceeds to repay creditors. Depositors, or account holders, are first in line amongst the creditors to get their money back.

Most banks hold more assets than deposits. So in theory, depositors should always be made whole.

Usually, the failed bank gets sold, assets and all, to a competitor. For account holders, when the process is smooth, nothing changes other than the logo on their local branch: even their account numbers remain the same. But for large banks, and at times of crises, the process isn't smooth.

Most banks held more assets than deposits at the time they failed.

Deposits vs. Assets

Source: FDIC. Built on

IndyMac's took 9 months.

IndyMac collapsed in July 2008 during the Great Financial Crisis. At the time, it was the fourth largest bank failure of all time.

FDIC Insurance kicked in immediately to protect account holders up to $100k. Account holders were able to withdraw those funds immediately. But the process of unwinding the rest of the assets, to recover funds for the accounts over $100k took time.

It was hard to find willing buyers for IndyMac. Most other banks were suffering already due to the crisis. Account holders had to wait until March 2009, when the bank was sold to OneWest, to access their remaining savings.

WaMu's happened overnight.

Washington Mutual failed in Sept 2008, making it the largest bank failure of all time.

Many had been anticipated the collapse for the months prior. The FDIC held a secret auction for the bank, before it was placed into receivership, which was won by JP Morgan Chase.

After the auction, WaMu was immediately placed into receivership by the FDIC, and officially sold. Account holders didn't need to tap into the FDIC insurance, and were able to access their savings immediately.

So what happens next with SVB?

I'd guess that a larger bank comes in to acquire them, perhaps as soon as next week and the situation will be look like the WaMu case study.

But are more banks are vulnerable to the effect of rising rates? Back in the 1980s, several banks failed during the Savings and Loans crisis, triggered by the Federal Reserve raising interest rates. SVB's collapse has echoes of the same period.