By Wong Kon How
Throughout history, there have been several instances of bank runs in the US that have caused significant economic damage. The most notable examples include the Great Depression in the 1930s, the Savings and Loan Crisis in the 1980s, and the 2008 financial crisis, which led to the collapse of several major financial institutions.
More recently, in March 2020, the onset of the COVID-19 pandemic caused a surge in demand for cash and withdrawals from banks. While concerns about the economic impact of the pandemic and the possibility of bank closures contributed to this trend, the Federal Reserve and other government agencies took measures to prevent a widespread bank run by ensuring that banks had access to adequate liquidity and by guaranteeing deposits through the FDIC.
However, in March 2023, a new bank run began at SVB, a major financial institution with total assets of $212 billion as of September 30, 2022. The roots of SVB's collapse stem from dislocations spurred by higher interest rates. As startup clients withdrew deposits to keep their companies afloat in a chilly environment for IPOs and private fundraising, SVB found itself short on capital. To make matters worse, the bank was forced to sell all of its available-for-sale bonds at a $1.8 billion loss, which triggered another wave of deposit withdrawals.
As a result, SVB's stock collapsed within days, causing widespread concern among investors and customers. The situation highlights the ongoing risks associated with bank runs and the importance of government intervention to prevent them.
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