The former CEO of Silicon Valley Bank, Greg Becker, is set to testify before the US Senate Banking Committee, saying that no bank could have survived the $142 billion run that triggered the bank's collapse and spread panic throughout the financial system. Becker's prepared comments come ahead of the hearing, and he plans to apologise for the bank's fall, calling it "personally and professionally devastating". He will also defend his decision to cash out stock and options in the weeks before the bank collapsed. Becker plans to spread the blame for the bank's problems between "rumours and misconceptions" fomented by social media and an aggressive series of interest rate hikes by the Federal Reserve that came as a surprise.
Becker's prepared remarks offer a counter-history to recent testimony from regulators and a report produced by the Federal Reserve that largely blamed mismanagement for the lender's eventual collapse. Regulators have said they raised concerns with the bank about its risk management practices but should have pressed harder for fixes. However, Becker says that as the bank got bigger in 2021 and 2022, it worked to improve its governance, controls, liquidity, and risk management after getting feedback from regulators. By the end of 2022, the bank's capital ratios were similar to or higher than its peers, and well above the regulatory thresholds for well-capitalised banks.
Becker's testimony implies that the Federal Reserve's interest rate hikes were a surprise to the bank, despite the Fed in 2021 having "described inflation as a transitory risk, suggesting that interest rates would not increase significantly in the short term." The week the bank collapsed, it decided to sell some securities and take a $1.8 billion loss. It also said it planned to raise an additional $2.25 billion in capital to bolster its balance sheet, which spooked depositors and investors.
Becker also plans to defend his sale of stock and options before the collapse and receiving an earlier bonus, saying that the sale was routine and in line with his previous practice to periodically sell stock and stock options. He says he held nearly five times the amount of shares required by the board of the bank and as CEO regularly sold the underlying shares of his stock options before they expired through 10b5-1 plans. Becker says SVB's legal team approved his plan to sell stock options on the basis that he was not in possession of any material non-public information at that time. Becker says the trade executed just 11 days before SVB's bank failure was based on a pre-determined stock price and date trigger.
Social Plugin