Bank Heterogeneity and Crisis Migration: A General Equilibrium Analysis of Systemic Risk

In the wake of the 2023 Silicon Valley Bank collapse and the 2025 tariff shocks, systemic risk poses a serious threat to global financial stability. We propose a three-period general equilibrium (GE) model that accounts for bank heterogeneity and crisis-driven migration. Our model distinguishes between retail banks, with a marginal expected shortfall of -0.019, and investment banks at -0.045, successfully reducing systemic risk and lowering the overall expected shortfall from -0.032 to -0.029. Unlike complex DSGE frameworks, our model offers clear insights into the vulnerabilities of Silicon Valley Bank and the impact of tariffs. We recommend Basel III-aligned policies, including capital relief and targeted stress tests, and propose real-time crisis prediction tools. This model serves as a vital resource for policymakers and investors, helping them navigate systemic crises and address the challenges posed by "too big to fail" institutions.