Washington (EFE).- The former directors of the US banks Silicon Valley, Signature and First Republic did not intonation the mea culpa for the fall of these first two institutions and the rescue of the third and blamed what happened on a series of “unprecedented” events impossible to foresee”.
The House Financial Services Committee named former Silicon Valley Bank (SVB) and First Republic Bank CEOs Greg Becker and Michael Roffler, and Signature Bank co-founder and former Chairman Scott, in the witness box. Shay.
“SVB’s downfall was triggered by an unprecedented series of events. We take risk management seriously and have been receptive to the various regulators that have controlled the SVB over time,” Becker said.
SVB, specialized in emerging technology companies, had invested the excess liquidity achieved during the covid-19 crisis in long-term Treasury Bonds, assets that were affected by the rise in interest rates sponsored by the Federal Reserve .
“In 2020 and through the end of 2021, the message from the Federal Reserve is that interest rates were going to stay low and that the inflation that was beginning to bubble was only going to be temporary. Like the SVB, many other banks invested in its portfolio of securities”, pointed out its former manager.
criticism of the fed
Becker criticized that at the beginning of 2022 the Federal Reserve undertook a series of rate hikes that led to the “steepest increase in 40 years in a 12-month period.”
The SVB suffered a massive run on deposits after being forced to sell assets to cover liquidity needs. After its debacle, the authorities also intervened the regional bank Signature, dragged into the investor panic.
“By the end of March 9, 42,000 million dollars (about 38,000 million euros) in deposits had been withdrawn in ten hours, approximately one million per second. This was unprecedented. I don’t think that neither we nor any other bank could have exceeded such an outflow of deposits in such a short time,” he said.
Becker stressed that although as a former manager he must assume the result of what happened. Both the regulators and the SVB management did “the best they could”.
The position of Signature and First Republic banks
More direct were the former heads of the Signature and First Republic banks when it came to not taking charge of a situation that ended up also hitting European banks hard for fear of contagion.
“No one at First Republic could have foreseen the collapse of SVB and Signature, the speed at which it happened and the catastrophic effect this had on the banking industry. As of March 10, First Republic was doing business as usual,” Roffler said.
The former director recalled that 100,000 million dollars in deposits were withdrawn from his bank: “You cannot predict that something like this will happen. The contagion spread very fast and the panic is very difficult to control,” he said.
Shay, in turn, defended that his bank, Signature, was “solvent” and had a solid plan to continue operating. “I think I exercised a responsible role,” he added before the Lower House, noting that although he did not agree with the decision of the regulators to intervene in that entity, he recognizes “the important role that they play in the financial system.”
As Becker had stated the day before before the Senate Banking Committee. None of the three managers openly promised to return the bonuses received hours before the bankruptcy.