Precedent · Credit
The 2023 Regional Banking Crisis
2023
The March 2023 regional bank failures. Silicon Valley Bank and Signature failed within days as uninsured deposits fled; First Republic followed in May. A duration-and-confidence shock: banks sat on underwater bond books as rates rose, and deposit flight did the rest, until the Fed/FDIC backstop arrested it.
The signature
Each variable's peak deviation from the pre-event baseline, with the curve shape, the lag before it moved, and how long the recovery ran.
| Variable | Peak deviation | Shape | Lag / Recovery | Confidence |
|---|---|---|---|---|
| S&P 500 Broad index dipped; regional banks far worse | −7% | V | 0d lag · 90d | high |
| 10Y-2Y Curve 2Y plunged on rate-cut bets; sharp steepening | +60% | Spike | 0d lag · 120d | high |
| High Yield OAS HY widened briefly; contained by backstop | +35% | Spike | 0d lag · 90d | high |
| VIX Vol spiked then faded fast | +55% | Spike | 0d lag · 90d | medium |
Methodology
A sharp, mostly-contained confidence shock. Regional-bank equities collapsed, high-yield spreads widened briefly, Treasury yields plunged on flight-to-safety (the 2Y had its biggest 3-day drop since 1987), vol spiked, then the backstop capped it. The signature is deposit flight + held-to-maturity duration losses, not a 2008-style credit-quality collapse. Shapes: spike (spreads, vol), V (equities).
What's different now
The lesson is that fast rate hikes plant losses in HTM bond books that surface as confidence shocks — watch deposit betas and unrealized losses. A decisive backstop contained 2023; a slower or politically-blocked response would have let it spread to the broader system.