Silicon Valley Bank’s (SVB) collapse last week has led to fears that other banks could face a similar fate amid record-high inflation and lending rates.

But what exactly led SVB to go under last week? Here’s what we know.

It hasn’t been just the Bank of Canada; the U.S. Federal Reserve has been raising interest rates from their record-low levels since last year in its bid to fight inflation.

Investors have less appetite for risk when the money available to them becomes expensive due to higher rates, which weighed on technology startups — the primary clients of SVB — because it made their investors more risk-averse.

Furthermore, tech companies have been hit hard in the past 18 months as the Federal Reserve has raised interest rates.

Higher interest rates caused the market for initial public offerings to shut down for many startups and made private fundraising more costly.

As a result, some SVB clients started pulling money out to meet their liquidity needs, resulting in SVB looking for ways last week to meet its customers’ withdrawals.

That brings us to what happened last Wednesday — March 8.

March 8: SVB sells off bonds
SVB had a US$21-billion bond portfolio consisting mostly of U.S. Treasuries — but holdings of government-backed bonds have fallen in value due to rising interest rates.