Former Silicon Valley Financial institution CEO Says ‘Unprecedented’ Withdrawals Sank Agency

Greg Becker, former CEO of failed lender Silicon Valley Financial institution, apologized in congressional testimony for its “devastating” collapse whereas citing rising rates of interest and mounting withdrawal requests as key causes of its demise. 

The financial institution was attentive to regulator considerations about its danger administration and dealing to handle points when an “unprecedented” financial institution run led to its failure, Becker wrote in ready testimony launched Monday by the Senate Banking Committee.

“The takeover of SVB has been personally and professionally devastating, and I’m really sorry for the way this has impacted SVB’s staff, shoppers and shareholders,” he stated.

Becker’s account contrasts with these of regulators and banking business executives who blamed SVB’s management for its failure to handle rate of interest dangers or diversify its enterprise past the extremely concentrated tech sector within the Bay Space.

Becker stated he didn’t imagine “that any financial institution might survive a financial institution run of that velocity and magnitude.” He additionally rebuffed regulators’ assertions that SVB did not handle rate of interest dangers, saying that up till late 2021, the Federal Reserve had indicated that rates of interest would stay low and that rising inflation was merely transitory.

Fed supervisors didn’t totally admire the issues at SVB and did not escalate deficiencies even after they had been recognized, the regulator stated in a report final month.

Becker, together with Signature Financial institution’s former co-founder and Chairman Scott Shay and former President Eric Howell, are set to testify earlier than the Senate Banking Committee on Tuesday. They’ll seem publicly for the primary time since their corporations collapsed.

The previous executives for New York-based Signature Financial institution, which additionally failed in March, maintained the financial institution might have survived had regulators not chosen to shut it, in keeping with separate testimony.

Signature’s failure was brought on by “poor administration” and a pursuit of “speedy, unrestrained progress” with little regard for danger administration, the Federal Deposit Insurance coverage Corp (FDIC) stated final month.

California banking regulators moved shortly to close SVB down on March 10 after depositors withdrew $42 billion in 24 hours. Two days later, regulators closed Signature.

Federal regulators invoked emergency powers to backstop all deposits at SVB and Signature, even these above the restrict assured by the FDIC. Officers facilitated the sale of SVB and Signature to different banks.

Tuesday Listening to

The hearings would be the first probability for lawmakers to grill the three executives.

Some lawmakers have additionally rebuked Becker for awarding bonuses and questioned whether or not he and others profited from inventory gross sales earlier than SVB’s collapse.

Becker defended these gross sales in his testimony, claiming he recurrently offered shares underlying his inventory choices as a part of a plan.

Financial institution regulators will even seem earlier than Congress on Tuesday at a separate Home of Representatives listening to. Lawmakers are anticipated to query their oversight of the lenders, how they dealt with the failures and their determination earlier this month to dealer a sale of troubled First Republic Financial institution to JPMorgan.