Greg Becker, from Silicon Valley Bank, closed last Friday by the Government, sold 12,451 shares on February 27
By iProfessional
13/03/2023 – 18,45hs
El CEO de Silicon Valley Bank (SVB), Greg Becker, sold US$3.6 million in bank shares two weeks before the collapse of the entity that was closed on Friday by the United States Government to protect the deposits of its clients.
Becker sold 12,451 shares on February 27, the first time he did so in more than a year, according to forms submitted to regulatory authorities that were released by the Bloomberg news agency.
The plan to sell the shares had been delivered just over a month earlier, on January 26.
Both Becker and SVB have not yet responded to press inquiries regarding this sale of shares and whether or not the operation simply responded to a temporary coincidence.
Silicon Valley Bank, an entity that finances startups
The entity, founded 40 years ago and recognized for financing Silicon Valley technology startups to which large banks are usually reluctant to lend money, began to suffer a run last Thursday, after eating a letter from Becker to the shareholders of SVB in which he indicated that the bank had some losses of $1.8 billion in the first quarter and that, faced with this, it was planning an accelerated placement of shares of US$1,750 million to clean up its capital position.
SVB was particularly affected by the sudden change in US monetary conditions: in 2021, companies supported by venture capital firms managed to finance themselves for a record of US$330,000 million, in a context of ultra-low rates by the FED.
Silicon Valley Bank (SVB) CEO Greg Becker has sold $3.6 million worth of shares in the bank
However, with record inflation in 40 yearsthe Fed ordered one of the fastest monetary adjustments in its history, and the bonds lost a good part of their value.
Another effect of the rate hike was the impact on the technology sector, since these companies -especially in their early stages of development- are the ones that most need cheap financing to solve growth that is not profitable in its early years. Without financing, they need to withdraw their savings from banks.
In a domino effect, the rate hike caused SVB’s deposits to fall and the bank had to sell its devalued bonds at a loss.
After Becker’s letter became known, a bank run began in which investors and Savers tried to withdraw US$42,000 million in less than 24 hours.
The withdrawal was prompted by the venture capital firms themselves, which advised startups to withdraw funds from the bank at risk of insolvency, despite Becker’s appeals to the bank’s large clients for calm.
At the time of its closure by the federal authorities on Friday, the bank had a negative balance of US$958 million.
The market fears a contagion effect in other banking entities
According to the California Department of Financial Protection and Innovation (DFPI) – the authority that ordered its closure – the run “caused the bank to be unable to pay its obligations.”
The fall of SVB is the biggest failure in the US financial system since the Lehman Brothers crisis of 2008, since it is the 16th largest bank in that country, with $209 billion in total assets at the end of 2022.
Now, the market fears a contagion effect on other banking entities: in particular, its sights are set on small and medium-sized banks that fell outside the FED’s radar and that took riskier positions compared to the big players.
In 2018, the Donald Trump administration reversed some of the strong regulations imposed by the 2008 crisis for these small banks, Raising from US$50,000 million to US$250,000 million in assets the requirement to qualify as a “systematically important” bank, a category that, for example, requires annual financial stress tests.
