A new independent review conducted by Charles River Associates at the request of Starling Advisory Group challenges the narrative that social media caused the 2023 collapse of Silicon Valley Bank. Federal Reserve Vice Chair for Supervision Michelle Bowman stated that 96% of social media discussions regarding the bank run occurred only after the failure had become inevitable.
The analysis identifies the bank's internal vulnerabilities as the primary drivers of the collapse. Specifically, 94% of the bank's deposit base was uninsured and heavily concentrated in venture capital-backed technology firms. Furthermore, the bank held unrealized securities losses that exceeded its total capital and lacked the operational readiness to access the Federal Reserve's discount window.
Bowman noted that supervisory staff were aware of these risks as early as March 2022 but failed to take decisive action due to a culture of risk aversion. To address this, the Federal Reserve is implementing a new process requiring examination teams to submit monthly reports directly to leadership when there is uncertainty regarding whether an issue requires supervisory intervention.
The findings emphasize that deposit risk is tied to the concentration of uninsured balances and the similarity of customer profiles. Regulators and banks are currently evaluating strategies to manage these risks, including the use of reciprocal deposit networks, which allow large balances to be distributed across multiple institutions to remain within insurance limits.
