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5:00Borrow Short, Lend Long: ALM and the SVB Failure Mode
A bank takes deposits you can pull tomorrow and lends them out for 30 years. That gap is the whole business model — and the thing that killed Silicon Valley Bank in 48 hours.
Every bank does the same magic trick: it funds long-dated assets (mortgages, loans, bonds) with short-dated liabilities (deposits that can leave on demand). This is maturity transformation, and it is profitable because the yield curve usually slopes upward — long rates exceed short rates, so the bank pockets the spread, its net interest margin (NIM). The discipline of measuring and managing the resulting mismatch is asset-liability management (ALM).
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