Bankruptcy Case: SVB FINANCIAL GROUP

SVB FINANCIAL GROUP is a holding company that operates four business units: Silicon Valley Bank, SVB Capital, SVB Private, and SVB Securities. Thereby, the Silicon Valley Bank is by far the largest business unit. After a bank run caused financial troubles, SVB FINANCIAL GROUP filed for Chapter 11 bankruptcy on March 17, 2023.

A company goes bankrupt when it does not get enough money from banks. A bank goes bankrupt when customers want their money back. As a result, corporate bankruptcies in the financial industry quickly emerge and are hard to predict. That was also the case for the corporate bankruptcy of SVB FINANCIAL GROUP.

Our BRAINKRUPTCY risk measure showed since October 2022 that SVB FINANCIAL GROUP exhibited financial distress that was unusual high in absolute and relative terms. The financial distress of SVB FINANCIAL GROUP was higher than during the Covid-19 crises in 2020. Furthermore, the financial distress of SVB FINANCIAL GROUP showed since October 2022 a pattern that was much different from its industry. While the industry risk measure was almost constant, our BRAINKRUPTCY risk measure increased in the case of SVB FINANCIAL GROUP. That observation indicated that SVB FINANCIAL GROUP had some serious problems in comparison to its industry.

The comparison between SVB FINANCIAL GROUP and the companies in the same industry (SIC 60: Depository Institutions) also indicated severe financial distress in the months leading up to the bankruptcy filing date. A lower SIC 2 industry rank shows that a company is suffering greater financial distress than other companies within the same industry; thus, the company with an industry rank of 1 is exposed to extremely high financial distress. The SIC 2 industry rank of SVB FINANCIAL GROUP drops sharply in October 2022. Nevertheless, there were also companies within that industry which exhibited higher measures of bankruptcy risk.

• The BRAINKRUPTCY risk measure helps identify financially distressed companies and upcoming bankruptcies at an early stage.

• The BRAINKRUPTCY risk measure helps prevent large financial losses in these financially distressed companies.

• The interaction between the bankruptcy risk of an individual company and the relative view of the company within its industry creates detailed and valuable insights.