Silicon Valley Bank: Structural Severity Backtest

Four Frequencies Framework | Q1 2018 – Q1 2023 | Federal Data

Final Composite ⓘWeighted average of all four frequencies at the final data point in the timeline.

0.80

Critical band at failure

Peak Thinness ⓘHighest Thinness score recorded during the measured period. Thinness tracks concentration risk and single points of failure.

0.92

Concentration + duration mismatch

Data Provenance ⓘClassification of data sources. FEDERAL-VERIFIED means the majority comes from filings, investigations, and databases produced under legal obligation.

FEDERAL-VERIFIED

FDIC, Fed, SEC, FOMC sources

Failure Mode ⓘThe dominant structural failure pattern the framework identified in this case.

Connected Crisis

All four frequencies elevated

How to Read This Chart

The Four Frequencies

Each line on this chart represents one of the Four Frequencies, scored from 0 (healthy) to 1 (critical). Permission measures the gap between what an organization is allowed to do and how effectively anyone checks that authority. Absence measures capabilities that should exist but don't: safety systems never built, risk functions left empty, testing layers skipped. Thinness measures concentration risk: how much depends on too few people, systems, or suppliers, so that losing any one causes disproportionate damage. Management measures the gap between what internal metrics report and what is structurally true. When the numbers look fine but the underlying conditions do not, this line rises.

The Composite

The thick gold line is the composite score: a weighted average of all four frequencies. The weights vary by case based on which structural dynamic dominated. A rising composite means the overall structural condition is deteriorating. A falling composite means constraints are being rebuilt. The composite does not predict when something will break. It measures how much structural strain exists when it does.

The Severity Bands

The colored background zones show severity thresholds, from dark green at the bottom (baseline health) through progressively warmer colors to dark red at the top (critical failure). When a line enters the orange-to-red zone above 0.55, that condition has moved beyond early warning into active degradation. When the composite enters that zone, multiple conditions are degrading simultaneously.

The Event Markers

Vertical dashed lines mark real-world events: crashes, regulatory changes, leadership departures, failures. The chart does not cause these events. It shows what structural conditions existed when they occurred. The gap between when the framework detects escalation and when the event happens is the structural lead time: the window during which the condition was readable in the data. Hover over any data point on the chart to see its exact value.

Composite Weighted average of all four frequencies. The thick gold line. Weights for this case are in the Methodology section below. Permission The gap between what an organization is allowed to do and how effectively anyone checks that authority. Absence Capabilities that should exist but don't: safety systems, risk functions, testing layers that were never built or were removed. Thinness Concentration risk: how much depends on too few people, systems, or suppliers, making the organization fragile to single points of failure. Management The gap between what internal metrics report and what is structurally true. When the numbers look fine but the underlying conditions do not.

Severity: 0–0.25 Baseline 0.25–0.40 Low 0.40–0.55 Moderate 0.55–0.70 High 0.70–0.85 Severe 0.85–1.0 Critical

The Framework Saw It Two Years Before the Bank Run

The composite severity score crosses into "Moderate" territory by mid-2021, nearly two years before SVB collapsed. It hits "High" by early 2022, a full year before the bank run. During this entire period, SVB's official supervisory rating from regulators was still "Satisfactory." The framework was reading the structural condition that the regulatory system was missing. That gap between what the framework sees and what the official rating says is itself a signal. It means the measurement system has failed.

Everything Made Everything Else Worse

SVB put 82% of its securities into held-to-maturity bonds that could not be sold without realizing losses (Thinness). Then it removed the interest rate hedges that protected those bonds (which also made the risk invisible to internal reporting). Then 94% of its deposits were uninsured, meaning depositors could pull their money instantly with no friction. And the Chief Risk Officer position sat empty for eight months during 2022. Each of these conditions made every other condition worse. No part of the system was absorbing the strain. When rates rose, there was nothing between the trigger and total failure.

Sources: FDIC Call Reports (quarterly, 2018–2023); FOMC published target rates; SVB Financial Group SEC filings (10-K, 10-Q); Federal Reserve "Review of the Federal Reserve's Supervision and Regulation of Silicon Valley Bank" (April 2023); Federal Reserve OIG "Material Loss Review of Silicon Valley Bank" (Report 2023-SR-B-013, September 2023); FDIC post-mortem (April 2023); EGRRCPA (Public Law 115-174, May 2018).
Methodology: Severity 0–1 scale. Weights: Thinness 0.35, Absence 0.30, Permission 0.20, Management 0.15. See DATA-PROVENANCE.md for full classification.