A bank's main income usually comes from...

The gap between loan and deposit rates

What brought down Silicon Valley Bank in 2023?

Bond losses and a rush of withdrawals

Up to US$250,000 per depositor, per bank

The money you put in a bank doesn't sit in a vault with your name on it. Most of it is lent out to other people and to businesses.
Banks pay savers a lower interest rate and charge borrowers a higher one. That gap is their main income. Fees for cards and transfers add more.
Example: a bank pays 3% a year on deposits and charges 9% on loans. On US$1,000,000 lent out, that 6-point gap brings in about US$60,000 a year, before costs and bad loans.
When the central bank raises its rate, banks usually raise loan and deposit rates too, often with a delay. Loan rates often rise faster than savings rates.
Silicon Valley Bank (US, March 2023) had put deposits into long-term bonds that lost value as rates rose. When it sold some at a loss, depositors tried to pull about US$42 billion in one day. It collapsed.
Common mistake
Myth: “Money in a bank is always 100% safe.” Deposit insurance only covers you up to a limit per bank: US$250,000 in the US, €100,000 in the EU, Rp2 billion in Indonesia.
Key takeaway
Banks earn the gap between what they pay savers and what they charge borrowers. They fail when they lose money and depositors lose trust at the same time.

A bank's main income usually comes from... The gap between loan and deposit ratesBanks pay savers a low rate and charge borrowers a higher one. The gap covers their costs and leaves a profit.
When the central bank raises rates, loan rates usually... RiseBanks borrow and lend around the central bank's rate, so loan rates usually follow it up, often with a delay.
What brought down Silicon Valley Bank in 2023? Bond losses and a rush of withdrawalsRising rates cut the value of its long-term bonds. When that became public, depositors rushed out. Most of its deposits were above the insured limit.
In the US, deposit insurance covers... Up to US$250,000 per depositor, per bankThe FDIC limit is US$250,000 per depositor per bank. For SVB, US authorities chose to protect all deposits, but that was a special decision, not a promise.