The 2023 regional banking crisis brought bank stocks into mainstream focus for the first time since 2008. The turmoil began nearly three years ago when state banking authorities abruptly closed Silicon Valley Bank, and the Federal Deposit Insurance Corporation (FDIC) stepped in as receiver.
At the heart of the crisis was a liquidity issue. Silicon Valley Bank's balance sheet was heavily concentrated in long-term bonds, which had significantly declined in value due to rising interest rates. These bonds, if held to maturity, would have returned their full principal.
