. Amid good times in recent years, their corporate deposits swelled. Unfortunately, SVB invested these spoils poorly. When tech took a disproportionate hit from the recent inflationary downturn, clients burned through savings, pulling out their deposits. That left the bank short of cash and forced to sell its tarnished investments at cut-rate prices.
SVB focused on tech, but its downfall is an old story of concentration risk. Look, for instance, at Texas. A 1970s oil boom grew deposits at local banks. When petroleum prices fell in the 1980s, though, energy companies began defaulting on loans from these banks. Banks compensated by turning to bets on Texan real estate – but with the local economy so dependent on oil, this meant little actual diversification.