SVB former CEO ties collapse to rumors, Fed Reserve’s interest rate hike

Silicon Valley Bank erstwhile CEO Greg Becker blamed the bank’s nonaccomplishment connected an unprecedented slope tally pursuing rumors astir the slope and the Federal Reserve’s involvement complaint hikes.

In a May 16 testimony earlier the US Senate Banking Committee, the erstwhile slope enforcement claimed that societal media fueled the slope tally — adding that nary fiscal instauration could past a akin situation.

Ex-SVB CEO blames Fed Reserves involvement hikes

Becker pointed fingers astatine past year’s Federal Reserve’s involvement complaint hike. He described the involvement hike arsenic “the steepest complaint summation implicit a 12-month play successful astir 40 years.”

The slope main added that the fiscal regulator’s “messaging” of “transitory” ostentation lured the slope into investing its securities portfolios successful the “low-yield situation created by the Federal Reserve.”

While admitting the precocious complaint affected the worth of immoderate of SVB’s securities portfolio, helium claimed that the slope inactive had government-backed securities and could person borrowed against them.

“The summation successful involvement rates resulted successful a diminution successful the just worth of SVB’s securities portfolio—which was disclosed successful our securities filings—those government-backed securities remained safe, and we expected that SVB could get against them.”

Rumors, misconceptions fuelled slope run

However, helium noted that the rumors and misconceptions surfacing online that compared SVB to Silvergate Bank — including a Financial Times nonfiction — triggered the bank’s collapse.

“SVB had been compared to Silvergate successful a Financial Times nonfiction published connected February 21, which provided antagonistic commentary regarding Silvergate and SVB’s securities portfolios. Silvergate’s nonaccomplishment and the nexus to SVB caused rumors and misconceptions to dispersed rapidly online, starring to the commencement of what would go an unprecedented slope run.”

According to his testimony, the slope customers withdrew $42 cardinal successful deposits wrong 10 hours connected March 9, and different $100 cardinal successful deposits were requested to beryllium withdrawn connected March 10. Becker said this accounts for astir 80% of the bank’s deposits.

“I bash not judge that immoderate slope could past a slope tally of that velocity and magnitude, which was ‘far beyond humanities precedents.”

Meanwhile, Becker’s claims contradict those of the authorities. According to the regulators, SVB failed due to the fact that of its mismanagement by the enactment team, the nonaccomplishment of Feds supervisors to code issues connected time, and regulatory changes from the past administration.

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