An Exploration of Bank Failure in Silicon Valley and the Interaction of Failure Factors - Empirical Analysis Based on VAR Model

The bankruptcy of Silicon Valley Bank (hereinafter referred to as SVB), as a topical issue, was a bank liquidity crisis event mainly triggered by the rising interest rates of the Federal Reserve. In order to further reveal the risks in the business structure of Silicon Valley Bank and to provide theoretical support for SVB’s cash outflow and maturity mismatch phenomenon, this paper uses the Fed interest rate, SVB’s Treasury asset ratio, bond-weighted duration and cash balance to total assets ratio as the research objects. It analyses the impact of the Fed interest rate on SVB’s financial indicators and the interaction between the indicators through unit root test and co-integration test using Var model. The interaction between the indicators is analysed by impulse response and variance decomposition to examine the magnitude, peak and persistence of the impact of shocks. Finally, with the lagged forecast responses, the omissions of Basel III are presented, and some suggestions are made for future precautionary measures in the banking sector.