- A few hours before the collapse of the Silicon Valley Bank, performance bonuses are said to have been paid to top managers last Friday.
- CEO Greg Becker also sold $3.6 million of shares in parent company SVB Financial Group in February.
- The collapse of the bank has triggered great uncertainty in the US economy. The US government has now assured that the deposits are safe.
California’s Silicon Valley Bank (SVB) paid out annual bonuses shortly before its collapse. Eligible employees of the money house would have received their performance bonuses a few hours before the closure by the US government. This is reported by the news site “Axios”. CEO Greg Becker also sold $3.6 million of shares in parent company SVB Financial Group in February, Bloomberg reports.
SVB, which specializes in financing tech start-ups, was shut down by regulators on Friday after its shares posted a record one-day loss on Wall Street on Thursday, wiping out around $80 billion in market value.
The US government intervenes
After the US start-up financier and another bank from New York got into trouble, the US government stepped in and announced that all deposits with the financial institutions would be protected. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and the FDIC issued a joint statement on Sunday evening (local time) that all SVB depositors would be fully protected and would be able to access all their money from Monday. A similar regulation also applies to Signature Bank in New York, which was closed by its state licensing authority on Sunday. US President Joe Biden said people don’t need to worry about their deposits. He also announced consequences for those who triggered the turmoil.
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The SVB, founded in 1983, had seen huge withdrawals of funds in the past few days as a result of liquidity concerns. SVB shares were suspended from trading on Friday after a price slide due to the acute emergency. Other banks also came under considerable pressure on the stock exchange. Fear of loan defaults in the banking sector increased again. The problems of the US banks also caused uncertainty on the European stock exchanges.
The US economy has shaken up
The US Treasury, the Federal Reserve and the deposit insurance company FDIC are now trying to counteract the general nervousness. The US banking system remains resilient and is on solid footing, the joint statement said. The steps now decided are important measures to protect the US economy by strengthening public confidence in the American banking system. “The taxpayer will not incur any losses related to the resolution of Silicon Valley Bank,” it said. This also applies to the Signature Bank.
A senior Treasury official stressed that the measures were intended to help depositors, not to bail out the banks themselves, who had taken risks and had to bear the losses themselves. It is not a situation like the 2008 financial crisis.
Those responsible for “mess” should be held accountable
Yellen had previously ruled out a government bailout of Silicon Valley Bank. In the financial crisis a few years ago, the government intervened in this way, Yellen said in an interview with CBS on Sunday. But she emphasized: “We won’t do that again.”
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Biden emphasized that the solution that has now been found is about protecting American workers and small businesses and keeping the financial system secure. “The American people and American businesses can have confidence that their bank deposits will be there when they need them,” the Democrat said in a written statement released by the White House on Sunday evening (local time).
Biden announced on Monday he would comment on how to proceed to maintain a resilient banking system and protect the economic recovery. “I am determined to hold those responsible for this mess accountable and to continue our efforts to strengthen supervision and regulation of larger banks.”