The March 2023 bank interventions in long-run context Silicon ValleyBank and beyondAndrew Metrick and Paul Schmelzing1 2Economics Working Paper 23107HOOVER INSTITUTION434 GALVEZ MALLSTANFORD UNIVERSITYSTANFORD, CA 94305-6010March 24, 2023U.S. and European banking institutions were hit by a wave of distress in March 2023.Policymakers on both sides of the Atlantic reacted with an array of interventions, some targetingindividual institutions, others designed to shore up the banking sector as a whole. This papercontextualizes events using a new long-run database on banking-sector policy interventions overthe last eight centuries. On that basis, recent actions have already been unusual in their policy mixand size in the database, the vast majority of events with the same pattern of interventionsultimately evolved into “systemic” bank-distress episodes.The Hoover Institution Economics Working Paper Series allows authors to distribute research fordiscussion and comment among other researchers. Working papers reflect the views of the authorsand not the views of the Hoover Institution.1Yale School of Management and NBER.2Boston College and Hoover Institution, Stanford. schmelzibc.edu. The March 2023 bank interventions in long-run context Silicon Valley Bankand beyondAndrew Metrick and Paul Schmelzing1 2March 24, 2023AbstractU.S. and European banking institutions were hit by a wave of distress in March 2023.Policymakers on both sides of the Atlantic reacted with an array of interventions, some targetingindividual institutions, others designed to shore up the banking sector as a whole. This papercontextualizes events using a new long-run database on banking-sector policy interventions overthe last eight centuries. On that basis, recent actions have already been unusual in their policy mixand size in the database, the vast majority of events with the same pattern of interventionsultimately evolved into “systemic” bank-distress episodes.In March 2023, the failure of Silicon Valley Bank (SVB) shocked global financial markets. In manyways, the SVB failure was a classic bank run, with details that appear drawn from the 19 centurythrather than the 21 . With a deposit base more than 90% uninsured and a balance sheet badly damagedstby a combination of bad luck and bad strategy, SVB could not be saved by the standard tools of theFederal Reserve and FDIC. Instead, the FDIC was forced to take the unusual step of a takeover duringbusiness hours, with many details of this resolution not released until the next weekend. These eventsbegan a series of bank interventions on both sides of the Atlantic that is still ongoing as of this writing.A long-horizon view through the prism of intervention patterns can allow for the identification of a“systemic” banking crisis long before the macroeconomic data of that period is complete; in this casethe combination and size of interventions in March 2023 strongly suggest that we are already in themidst of a systemic event.Beginning with Bagehot (1873), the management of banking crises has been closely related to thelender-of-last-resort function of central banks. But while this association is highly salient, it has neverrepresented the full story. Instead, crisis-fighting finds central bankers joining fiscal authorities, depositinsurers, and other regulators while using multi-pronged interventions that target every region of banksbalance sheets. In this paper, we attempt to place the March 2023 interventions within this “full balance12Yale School of Management and NBER.Boston College and Hoover Institution, Stanford. schmelzibc.edu.1 sheet” framing, following the taxonomy and database of Metrick and Schmelzing (2023, henceforthMS online database). Figure 1 illustrates this taxonomy with 7 major categories and 20 sub-categories; the corresponding database includes almost 2,000 interventions covering 138 countries over750 years. Importantly, policy interventions are often associated with a “systemic” banking crises event standard chronologies such as Reinhart and Rogoff (2009) use evidence of policy interventions todetermine the severity of a bank-distress event: however, the MS database goes beyond such definitionsand also includes hundreds of policy intervention events that are not included in these standardchronologies. This intervention prism allows drawing some implications for current dynamics, giventhe most recent sequence of events.Figure 1: Overview of major intervention categories and subcategories during banking-crisisintervention episodes.Figure 1 displays the seven major intervent