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Rate hikes, social media drove SVB’s collapse, former CEO says

Click to play video: 'Silicon Valley Bank collapse: Fed became aware of interest rate, and liquidity risks in Nov. 2021'
Silicon Valley Bank collapse: Fed became aware of interest rate, and liquidity risks in Nov. 2021
Federal Reserve Vice-Chair for Supervision Michael S. Barr testified before a U.S. Senate Banking Committee on Tuesday that the regulator’s "supervisors began highlighting these deficiencies at (SVB) on interest rate risk management and liquidity risk management in a serious way in November of 2021 as far as I know -- so a little more than a year prior to that (Barr first learning of deficiencies in February 2023). They intensified that supervisory review as part of its full-scope exam in the summer of 2022 when the firm was downgraded for deficiencies in its risk management practices. And they brought those risk management issues, according to the record, to the CFO of the firm in October and issued additional findings in November of 2022," Barr said – Mar 28, 2023

Greg Becker, former CEO of collapsed lender Silicon Valley Bank, apologized in congressional testimony for what he called the “devastating” collapse of the firm while citing rising interest rates and social media as key causes of its demise.

In prepared testimony published on Monday by the Senate Banking Committee, Becker said he believed the bank was responsive to regulator concerns about managing risk and working to address issues before an “unprecedented” bank run led to its failure.

“The takeover of SVB has been personally and professionally devastating, and I am truly sorry for how this has impacted SVB’s employees, clients and shareholders,” he said.

Click to play video: 'Central banks working together to stem fears following SVB, Credit Suisse instability'
Central banks working together to stem fears following SVB, Credit Suisse instability

Becker’s account contrasts with those of regulators and banking industry executives who blamed SVB’s leadership for its failure to manage interest rate risks or diversify the bank’s business beyond the highly concentrated tech sector in the Bay Area.

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Becker said he did not believe “that any bank could survive a bank run of that velocity and magnitude.”

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Becker, along with Signature Bank’s former co-founder and Chairman Scott Shay and former President Eric Howell, are
set to testify in front of the Senate Banking Committee on Tuesday at 10 a.m. EDT (1400 GMT) where they will appear publicly for the first time since their firms collapsed, triggering rare government intervention to backstop deposits.

Click to play video: 'Silicon Valley Bank collapse: Ripple effects to be felt by Canadian households'
Silicon Valley Bank collapse: Ripple effects to be felt by Canadian households

The former executives for New York-based Signature Bank, which also failed in March, maintained the bank could have survived had regulators not chosen to close it, according to separate testimony.

California banking regulators moved quickly to shut SVB down on March 10 after depositors withdrew $42 billion in 24 hours. Regulators closed Signature on March 12 after it also experienced liquidity issues following SVB’s collapse.

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(Reporting by Pete Schroeder and Hannah Lang in Washington; Editing by Chris Reese and Cynthia Osterman)

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