I believe this is what various "stress tests" are for. If your bank is a certain size you have to basically do scenario planning for situations like ”what if 25% of your deposits leave overnight and you have to sell securities that you didn't plan to sell?” As I understand the situation, SVB was just under the required size to submit to those stress tests.
There are smaller tests for liquidity, but the specific major stress test that SVB lobbied themselves out of is the DFAST (the Dodd Frank Act Stress Test) and it does not test liquidity. It takes the scenario of an adverse economic situation and comes up with a bunch of hypothetical numbers you might see for major economic variables - “the unemployment rate will be this, the default rate will be that, etc,” - and then banks have to run their books according to those hypothetical numbers and report back what their capital would look like in that situation. If it looks bad, they have to take action to make their capital more secure. Nowhere does it simulate a situation where depositors leave en masse.
There are liquidity tests and SVB was probably failing them (which is probably why the FDIC was paying close attention to them), but that specific test you’ve heard about is not related.
Domestic-focused banks with over $250B in assets need to comply with the Basel III inspired (I think?) LCR of enough high-quality liquid assets to cover 30 bad days of withdrawals. What is the requirement for banks under $250B? Another Q would be, did they sell their extension-risk suffering bond portfolio because those bonds didn't qualify as HQLA? I mean they'd seem to me to be liquid and high-quality just as they were, but any sales would harm their balance sheet right?
The original asset threshold over which banks were subject to "enhanced prudential standards" in the 2010 Dodd-Frank bill was $50B. In 2018 the requirement was amended to >$250B in assets, or at the discretion of the Fed for banks over $100B. SVB was reportedly at $210B in assets.
