Silicon Valley Bank’s Freefall as Deposits Disappear in Seconds
Silicon Valley Bank faced a devastating collapse, with shocking revelations emerging during a recent US Senate Banking Committee hearing.
Greg Becker, the former CEO of SVB Financial Group, provided insight into the bank’s downfall. According to Becker, a combination of factors contributed to the catastrophe, including the Federal Reserve’s rapid rate hikes and negative sentiment on social media.
Becker highlighted that the Federal Reserve’s assurances of low-interest rates and temporary inflation had led banks to invest a significant amount, approximately $2.3 trillion, in low-yield securities between 2020 and 2021.
The downfall of Silvergate Capital Corp. added fuel to the fire. Media comparisons between SVB and Silvergate created rumors and misconceptions that rapidly spread online, resulting in an unprecedented bank run. Within just 10 hours on March 9th, a staggering $42 billion in deposits was withdrawn from SVB, equivalent to $1 million disappearing every second.
Silicon Valley Bank’s heavy concentration in the tech sector and its portfolio of long-dated bonds, which devalued as interest rates rose, made it vulnerable to a bank run. This triggered subsequent bank runs, leading to Signature Bank’s seizure and First Republic Bank’s eventual collapse.
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Becker acknowledged the concerns raised by auditors and regulators, and SVB executives were actively addressing them. Efforts included expanding the bank’s Treasury management team to enhance risk management and consulting with the Federal Reserve Board to hire a chief risk officer experienced in managing large financial institutions.
Reflecting on the catastrophic events, Becker expressed profound sorrow for the impact on SVB’s employees, clients, and shareholders. He believed that the leadership team made decisions in good faith and in the best interests of SVB. Becker expressed his hope to provide insights that would aid the Committee and the public in understanding the situation.
The Senate Banking Committee continues its scrutiny of executives from failed banks, with figures like Scott Shay, co-founder and former chairman of Signature Bank, also testifying before the Committee.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
