banking industry

Silicon Valley Bank: What Happened and What Happens Next

Antonio Graceffo

The short explanation of what happened to SVB is that it was hit by a run on the bank. Due to the fractional reserve banking system used in the United States and other countries, if every depositor decided to withdraw their money on the same day, the bank would run out of funds. Only a small percentage of all deposits are held in a bank. The rest are loaned out, and this is how banks earn money.

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