Becker sold 12,451 shares last February 27, the first time he did it in more than a year, according to forms submitted to regulatory authorities that were disseminated by the Bloomberg news agency. The plan to sell the shares had been delivered just over a month earlier, the 26 of January.
Both Becker and SVB they did not answer up to now, to the inquiries from the press regarding this sale of shares and whether or not the operation responded simply to a temporary coincidence. Meanwhile, Becker’s moves put another element under the scrutiny of the bank.
The entity, founded 40 years ago and recognized for financing emerging companies Silicon Valley tech startups to which the big banks are usually reluctant to lend money, began to suffer a run last Thursday, after learning of a portfolio from Becker to the shareholders of SVB in which he indicated that the bank had losses of US$1.8 billion in the first quarter and that, faced with this, he was planning a 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.
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The bank took billions of dollars in deposits and, confident that the rates would not change, he placed the money in long-term treasury bonds. However, with a record inflation in 40 yearsthe fed arranged one of the fastest monetary adjustments in its historyand the bonds lost much of their value.
Another effect of the rate hike was the industry impact technologicalsince these companies -especially in their early stages of development- are the ones that most require cheap financing to solve a growth that is not profitable in his early years. Without financing, they need to withdraw their savings from banks.
In a domino effect, the rate hike I provoke a drop in SVB deposits and the bank had to sell at a loss their devalued bonds.
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Depositphotos
After Becker’s letter became known, a bank run in which investors and savers tried to extract US$42,000 million in less than 24 hours. The withdrawal was prompted by the venture capital firms that advised startups to withdraw funds from the bank before the insolvency riskdespite Becker’s pleas for calm to the bank’s large clients.
At the time of its closure by the federal authorities, the bank registered a negative balance of US$958 million. according to California Department of Financial Protection and Innovation (DFPI) -authority that ordered its closure-, the bullfight “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 crisis of Lehman Brothers 2008, since it is the 16th largest bank in that country, with US$209 billion in total assets at the end of 2022.
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Now, the market fears for a contagion effect in other banking entities: in particular, the sights are set on the medium and small banks that were left off the radar of the fed and that they took riskier positions with respect to the big players.
In 2018, the administration of donald trump reversed some of the heavy regulations imposed by the 2008 crisis on these small banks, raising the requirement to qualify as a bank from $50 billion to $250 billion “systematically important”a category that, for example, requires annual financial stress tests.
Meanwhile, among the startup clients of BLSthere is concern about not being able to pay your wages from next week. The thing is Federal Deposit Insurance Corporation (FDIC)the federal authority that will be the depositary of the bank’s funds, promised access -as of Monday- to insured deposits, but this protection only covers those that are less than US$250,000, a minority percentage among the bank’s clients .
Source: Ambito
