Understanding Failed Banks: The Exceptional Cases of SVB and Signature Bank

The United States has witnessed 565 bank failures since 2000, averaging roughly 25 annually. Yet the consecutive collapses of Silicon Valley Bank and Signature Bank represent a unique phenomenon that demands deeper examination. These weren’t just routine bank closures—they were historic events reshaping industry perspectives on financial stability.

The Scale Factor: Why Size Matters

What truly distinguishes the recent bank failures is their magnitude rather than frequency. Silicon Valley Bank emerged as the second-largest bank failure in U.S. history with $209 billion in assets as of December 2022—approximately 2,000 times larger than Almena State Bank, the previous failure in 2020 with merely $69 million in assets. Signature Bank followed suit just two days later, ranking as the third-largest collapse with $110 billion in assets.

For context, only Washington Mutual’s 2008 failure ($307 billion in assets) exceeded SVB’s size. This distinction proves critical: even during 2010’s peak failure year when 157 banks went under, their combined assets totaled less than half of what Silicon Valley Bank held alone.

Before SVB’s March 2023 shutdown, no bank exceeding $7 billion in assets had failed in over a decade. The banking sector had grown complacent about mega-bank vulnerability.

Frequency Patterns: A Historical Perspective

Bank failure rates fluctuate dramatically based on economic cycles. The 2001-2007 period averaged just 3.57 failures yearly—a relatively tranquil era. The Great Recession fundamentally altered this trajectory.

When the U.S. entered recession in December 2007, the banking system fractured. From 2008 through 2012, failure rates exploded to 93 per year. The year 2010 witnessed peak devastation with 157 banks failing—more than the entire decade from 2013 to 2023 combined. Of all 565 failures since 2000, 465 (82%) concentrated within this single four-year catastrophe.

The recovery proved steady. From 2015-2020, annual failures dropped below five. Remarkably, 2021 and 2022 saw zero failures—creating an 867-day period without any bank shutdown before SVB ended this streak.

Timing Mechanics: Strategic Closures

Regulators employ deliberate scheduling for bank closures. Approximately 95% of the 565 failed banks that have been shut down since 2000 closed on Fridays, granting regulators a full weekend to manage asset liquidation, account settlement, and leadership transition before Monday’s customer demands.

Signature Bank became a notable exception, folding on Sunday, March 13, 2023—the only Sunday failure among all 565 cases. This unprecedented timing reflected regulators’ urgency: deposit runs were accelerating after SVB’s Friday collapse, threatening systemic contagion. By closing Signature Bank immediately over the weekend, authorities prevented a cascading panic across the financial sector.

This overnight intervention prevented what economists call a “self-fulfilling prophecy”—where depositor fears trigger actual bank runs, potentially destabilizing healthy institutions nationwide.

Geographic Concentration: Regional Vulnerabilities

Bank failures cluster geographically. California leads with 42 failed banks since 2000, followed by Florida and Georgia, which together experienced 30% of the nation’s failures this century. Illinois rounds out the top four. Notably, New York—despite being America’s banking capital—has seen only six failures.

The 2008-2012 housing crisis disproportionately devastated Florida and Georgia’s banking sectors, explaining their outsized failure concentration.

The Broader Implication

While 565 bank failures might sound alarming, context proves reassuring. Two failures in 2023 represent a statistical anomaly compared to the 93-year average during 2008-2012. However, the unprecedented size of these collapses—particularly Silicon Valley Bank’s position as the country’s 16th-largest lender to tech enterprises—signals that future vulnerabilities may emerge from unconventional channels, not traditional regional banking weaknesses.

The failed banks that have collapsed since 2000 tell a story of economic cycles, regulatory evolution, and systemic risk concentration shifting toward larger, more interconnected institutions.