Silicon Valley Bank failed more than three years ago, but a new Federal Reserve review provides a lesson that remains relevant to virtually every business owner:
Where you keep your money is a business risk in itself.
The Federal Reserve’s independent review of Silicon Valley Bank’s 2023 failure found multiple vulnerabilities inside the bank, along with significant shortcomings in how federal supervisors responded to those risks.
The findings are important for banking regulators.
But business owners don’t need to run a bank to learn from what happened.
SVB’s collapse demonstrated how quickly a company can discover that cash management, banking relationships and access to liquidity are part of operational risk management—not simply accounting decisions.
What the Fed’s Review Found
Federal Reserve Vice Chair for Supervision Michelle Bowman announced the initial findings of an independent review on September 18.
According to the review, Silicon Valley Bank entered its final period with several major vulnerabilities.
The bank had significant unrealized losses on securities that exceeded its capital.
Its deposit base was highly concentrated among venture-capital-backed technology companies.
Approximately 94% of its deposits were uninsured.
SVB also lacked adequate operational readiness to borrow from the Federal Reserve’s discount window when liquidity became critical.
The Federal Reserve review found that supervisors knew—or should have known—about the vulnerabilities as early as March 2022 but did not act promptly and decisively enough to require the bank to reduce them.
Those findings raise important questions about bank supervision.
For businesses, however, another issue deserves attention:
Why were so many companies exposed to the same bank at the same time?
Concentration Risk Doesn’t Only Apply to Customers
Business owners generally understand concentration risk when it involves revenue.
If one customer represents 50% of a company’s sales, losing that customer could threaten the company.
The same principle applies to suppliers.
Depending heavily on one supplier creates vulnerability if that supplier fails.
But companies don’t always apply the same thinking to their cash.
SVB became deeply connected to the technology and venture-capital ecosystem. Startups, investors and technology companies frequently used the bank, and companies within the same business networks often maintained relationships with the same financial institution.
That created concentration on both sides.
SVB had a concentrated customer base.
And many businesses had concentrated banking relationships.
When confidence in the bank deteriorated, those risks collided.
The FDIC Limit Matters
Federal deposit insurance generally protects eligible deposits up to $250,000 per depositor, per insured bank, for each account ownership category.
For an individual household, $250,000 may represent substantial protection.
For an operating business, it may not.
A company might need considerably more than $250,000 simply to meet payroll.
Add accounts payable, taxes, inventory purchases, rent, debt service, and normal working capital, and a healthy small or midsize company can easily maintain bank balances well above standard insurance limits.
That doesn’t automatically mean keeping more than $250,000 at a bank is irresponsible.
It does mean you should understand and manage the exposure rather than ignore it.
Cash Isn’t Risk-Free Just Because It’s Cash
Owners often think about risk primarily in terms of investments.
Stocks can decline.
Real estate values can fall.
Customers can default.
Inventory can become obsolete.
Cash feels different because its nominal value doesn’t fluctuate in the same way.
But business cash carries other risks.
There is bank risk.
There is liquidity risk.
There is access risk.
There is fraud risk.
And there is the operational risk created when a business cannot move money exactly when it needs to.
During a banking disruption, the most important question for a business may not be whether the money ultimately remains safe.
It may be:
Can I access enough money Friday morning to make payroll?
Those are very different questions.
Businesses Should Think in Terms of Liquidity, Not Just Balances
A company can look financially healthy on a balance sheet and still encounter an immediate crisis if it cannot access cash.
That is why business owners should think about liquidity as an operating system.
Where does the company hold its cash?
How much is insured?
How quickly can funds be moved?
Does the company have another banking relationship?
Does it have an available line of credit?
Who inside the company has authority to move money during an emergency?
How would payroll be funded if the primary bank became temporarily unavailable?
Those questions may seem overly cautious when everything is working normally.
Risk management often does.
The value becomes obvious when something stops working.
One Bank May Be Convenient—Until It Isn’t
Businesses have legitimate reasons to consolidate banking relationships.
It simplifies accounting.
Cash management becomes easier.
Companies may receive better service or pricing.
A bank that understands the business can also become an important source of credit.
The lesson from SVB isn’t that every business should scatter money among a dozen institutions.
That creates its own complexity.
The lesson is to balance convenience against concentration.
For some businesses, maintaining a secondary banking relationship may be prudent.
For others, cash-sweep products or other treasury-management tools may help manage deposit exposure.
Larger companies may use multiple institutions and more sophisticated cash-management structures.
The right answer depends on the business's size and complexity.
But every owner should at least know the answer to one basic question:
What happens to my company if I cannot use my primary bank tomorrow morning?
Credit Relationships Matter Too
Banking concentration isn’t only about deposits.
Businesses often rely on banks for revolving credit lines, equipment loans, commercial mortgages, and acquisition financing.
That creates another potential vulnerability.
A business may have plenty of cash but still depend heavily on one financial institution for working capital.
If that institution runs into trouble, changes its lending strategy, or decides a particular industry no longer fits its risk profile, the company’s access to capital can change.
That makes banking relationships part of capital strategy.
A secondary relationship established before it is needed can be very different from trying to find a new lender during a crisis.
There Is Also a Management Lesson
One of the most interesting findings in the Federal Reserve review concerns decision-making.
The review concluded that supervisors identified—or should have identified—significant vulnerabilities well before SVB failed but did not act decisively enough.
According to the review, one contributing factor was a culture in which staff could perceive inaction as safer than taking an action that might later prove wrong.
That lesson extends well beyond banking regulation.
Businesses encounter the same problem.
Management teams can recognize a risk without addressing it.
Everyone knows a customer concentration is dangerous.
Everyone knows a particular employee is indispensable.
Everyone knows the company depends too heavily on one supplier.
Everyone knows cash is concentrated at one institution.
But because nothing has gone wrong yet, the organization postpones action.
Recognizing a risk isn’t the same as managing it.
What Business Owners Should Do
The SVB review gives owners and CFOs a good reason to conduct a simple banking-risk review.
Look at where operating cash is held.
Determine how much is covered by applicable deposit insurance.
Understand what treasury-management tools are available.
Review backup liquidity.
Evaluate whether the company depends too heavily on one institution for both deposits and credit.
Make sure more than one appropriate person understands how to access or transfer money during an emergency.
And consider whether maintaining a secondary banking relationship makes sense for the business.
None of those steps requires believing another major bank failure is imminent.
That’s not the point.
Good risk management prepares a business for unlikely but potentially disruptive events.
The Larger Lesson
Silicon Valley Bank was unusual.
Its customer concentration was unusual.
Its level of uninsured deposits was unusual.
And the speed of its collapse was extraordinary.
That doesn’t make the lessons irrelevant to ordinary businesses.
It makes them easier to see.
Business owners spend enormous amounts of time protecting their companies from customer risk, employee risk, supplier risk, cyber risk, and market risk.
Banking risk deserves a place on that list.
The question isn’t whether you expect your bank to fail.
The better question is:
If something unexpectedly prevented you from accessing your money or credit tomorrow, could your business continue operating?
If the answer is unclear, that is a risk worth addressing before an emergency answers it for you.
Impact: Mixed
Businesses most affected: Companies maintaining large operating balances, businesses with deposits above standard FDIC insurance limits, venture-backed companies, companies dependent on revolving credit facilities, and businesses with highly concentrated banking relationships.
Sources
Federal Reserve Board — Initial Findings from Independent Review of Silicon Valley Bank, September 18, 2026
https://www.federalreserve.gov/newsevents/speech/bowman20260918b.htm
Federal Reserve Office of Inspector General — Material Loss Review of Silicon Valley Bank
https://oig.federalreserve.gov/reports/board-material-loss-review-silicon-valley-bank-sep2023.htm
Federal Deposit Insurance Corporation — Deposit Insurance FAQs
https://www.fdic.gov/resources/deposit-insurance/faq/