“The leadership team and I made the best decisions we could with the facts, forecasts, and outside expert advice available to us at the time,” Becker plans to mention, in line with a duplicate of his written remark posted at the committee’s website online.
His testimony comes lower than 3 weeks after a Federal Reserve overview of the bank’s cave in castigated its board and government staff for failing “to manage their risks.”
In early March, after what Becker’s written remark calls “rumors and misconceptions” about SVB’s well being unfold on-line, SVB misplaced $42 billion in deposits in one day. Customers asked withdrawals of an extra $100 billion for the following day, which proved to be the bank’s closing.
Over the ones two days, the bank suffered $142 billion in precise and asked withdrawals — a a couple of of the former biggest bank run in U.S. historical past, which noticed $19 billion depart Washington Mutual over 16 days in 2008, in line with Becker’s testimony.
“I do not believe that any bank could survive a bank run of that velocity and magnitude,” he’s anticipated to mention.
Becker hyperlinks the bank’s failure to govt insurance policies on spending and fiscal law. Government stimulus in accordance with the pandemic pumped just about $5 trillion in new deposits into business banks whilst the Fed’s near-zero rates of interest left the bank with few choices to deploy the brand new finances rather then to speculate them in low-rate govt securities, in line with his remark.
The bank grew to $212 billion in belongings through the top of 2021, virtually 3 times what it held two years previous.
Once SVB crowned $100 billion in belongings, it drew greater regulatory scrutiny as a big bank. SVB employed a number of skilled executives from establishments akin to Citigroup and Bank of America to improve its risk-assessment staff, whilst accomplishing a seek for a brand new leader threat officer.
That post remained vacant for a lot of closing yr, with the brand new government beginning paintings handiest in December, in line with Becker’s testimony.
By the top of closing yr, SVB had “roughly 1,000 people with all, or the majority, of their responsibilities focused on risk management of some type,” in line with Becker’s remark.
During 2020 and 2021, SVB executives had been reassured through Federal Reserve statements that emerging inflation would turn out “transitory,” permitting the central bank to stay rates of interest low.
When inflation endured and the Fed started elevating charges in March 2022, SVB’s govt securities impulsively started dropping price. To bolster its fortunes, the bank desperately sought to boost further capital in its ultimate weeks.
Becker’s look on Capitol Hill on Tuesday follows the discharge closing month of a Fed overview, which recognized a large number of shortcomings through federal regulators and likewise had harsh phrases for SVB’s most sensible executives.
“Silicon Valley Bank (SVB) failed because of a textbook case of mismanagement by the bank. Its senior leadership failed to manage basic interest rate and liquidity risk. Its board of directors failed to oversee senior leadership and hold them accountable,” stated the document through Michael Barr, the Fed’s vice chair for supervision.
“I never envisioned myself or SVB being in this situation,” Becker plans to mention.