Silicon Valley Bank failure: CEO Greg Becker sends message to employees
3 min read 11 Mar 2023, 06:34 AM ISTSilicon Valley Bank debacle: The Federal Deposit Insurance Corporation (FDIC) has taken control of the lenderSVB chief Greg Becker sold $3.6 million of the company stock under a trading plan on 27 February
PremiumSilicon Valley Bank, the US bank shut by regulators, has sent a message to its employees acknowledging the "incredibly difficult" 48 hours leading up to its collapse on Friday, Reuters reported.
SVB's chief Greg Becker in a video message told the employees, "he is working with banking regulators to find a partner for the bank".
There is "no guarantee" that a deal will be struck, he added.
At present, the Federal Deposit Insurance Corporation (FDIC) has taken control of the lender.
Separately, Bloomberg reported that Becker sold $3.6 million of company stock under a trading plan on 27 February. The last month's sale of 12,451 shares was the first time in more than a year that Becker had sold shares in parent company SVB Financial Group, according to regulatory filings. He filed the plan that allowed him to sell the shares on 26 January.
The sales were made through a revocable trust controlled by Becker, added the news agency.
About Greg Becker--the head of failed Silicon Valley Bank
Becker joined the embattled bank three decades ago as a loan officer.
He became president and CEO of SVB Financial Group in 2011.
Becker graduated from Indiana University with a bachelor's degree in business, according to Silicon Valley Bank's website. From there, he worked at a bank that served what he called "traditional companies."
Before becoming president and CEO of SVB Financial Group, Becker co-founded SVB Capital, the company's investment arm. He also served as the chairman of the Silicon Valley Leadership Group from 2014 to 2017 and was a member of the U.S. Commerce Department's Digital Economy Board of Advisors from 2016 to 2017. Becker cycles in his free time and has five grown children.
Silicon Valley Bank's website calls Becker a "champion of the innovation economy."
What caused Silicon Valley Bank's failure?
SVB Financial Group Inc's shutdown and takeover by banking regulators on Friday can be traced to the US Federal Reserve raising interest rates and souring the risk appetite of investors.
The Federal Reserve has been raising interest rates from their record-low levels since last year in its bid to fight inflation. Investors have less appetite for risk when the money available to them becomes expensive due to the higher rates. This weighed on technology startups - the primary clients of Silicon Valley Bank - because it made their investors more risk-averse.
As higher interest rates caused the market for initial public offerings to shut down for many startups and made private fundraising more costly, some Silicon Valley Bank clients started pulling money out to meet their liquidity needs. This culminated in Silicon Valley Bank looking for ways this week to meet its customers' withdrawals.
To fund the redemptions, Silicon Valley Bank sold on Wednesday a $21 billion bond portfolio consisting mostly of U.S. Treasuries. The portfolio was yielding an average of 1.79%, far below the current 10-year Treasury yield of around 3.9%. This forced SVB to recognize a $1.8 billion loss, which it needed to fill through a capital raise.
SVB announced on Thursday it would sell $2.25 billion in common equity and preferred convertible stock to fill its funding hole. Some SVB clients pulled their money from the bank on the advice of venture capital firms such as Peter Thiel's Future Fund.
This spooked investors such as General Atlantic that SVB had lined up for the stock sale, and the capital raising effort collapsed late on Thursday.
SVB scrambled on Friday to find alternative funding, including through a sale of the company. Later in the day, however, the Federal Deposit Insurance Corporation (FDIC) then announced that SVB was shut down and placed under its receivership. The FDIC added that it would seek to sell SVB's assets and that future dividend payments may be made to uninsured depositors.
