Silicon Valley Bank (SVB), one of the leading banks for startups and venture capital firms in the United States, failed because of a liquidity crisis that has reverberated throughout the startup ecosystem. Silicon Valley Bank’s struggles shed light on the many risks inherent in banking, including mismanaging the economic value of equity (EVE), failing to hedge interest rate risk, and a sudden outflow of deposits (funding risk). Risk arises when a bank’s assets and liabilities are not properly aligned (in terms of maturity or interest rate sensitivity), leading to a mismatch that can cause significant losses if interest rates change.
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Source: Cryptocurrency - investing.com
