The demise of Silicon Valley Bank has triggered concerns about American banks. In many ways SVB was idiosyncratic, with its narrow customer base and largely uninsured deposits. But it illustrates a wider problem: the decade of low interest rates created serious imbalances in financial balance sheets, made painfully apparent by the response of monetary policy to rapid inflation. As global interest rates move up, maturity risk is coming home to roost.

Around half of SVB’s assets were government bonds – surely the safest of assets. However, as bond-yields rose from the abnormally low rates of a few years ago to a more normal level, the current value of bonds fell sharply. Yes, a bond is assured of paying face value at maturity. But in the meantime, investors could benefit from the new higher interest rate by buying a new bond. The market price of the old bond had to fall to reflect this reality.