The fastest pace of rate hikes by the Federal Reserve in decades combined with negative social media sentiment contributed to the failure of SVB Financial Group’s Silicon Valley Bank, said Greg Bec…
The fastest pace of rate hikes by the Federal Reserve in decades combined with negative social media sentiment contributed to the failure of SVB Financial Group’s Silicon Valley Bank, said Greg Becker, former chief executive officer of the company.
Silicon Valley Bank catered to the technology-startup ecosystem, and its heavy focus on the sector combined with a portfolio of long-dated bonds that lost value as interest rates climbed made it particularly susceptible to the bank run that prompted regulators to seize the lender. Its failure touched off a number of other bank runs, leading to the seizure of Signature Bank days later and the eventual collapse of First Republic Bank as well.
“Silvergate’s failure and the link to SVB caused rumors and misconceptions to spread quickly online, leading to the start of what would become an unprecedented bank run,” Becker said in his testimony. “The next day, the bank run picked up steam. By the end of the day on March 9, $42 billion in deposits were withdrawn from SVB in 10 hours, or roughly $1 million every second.”
The bank also sought to hire a chief risk officer with experience running a so-called large financial institution after consultation with the Federal Reserve Board. SVB also looked to improve liquidity in 2022, he said, while noting that regulators said at that time that the bank had sufficient capital and liquidity.
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