In congressional testimony, Greg Becker, former CEO of collapsed lender Silicon Valley Bank, expressed regret for the bank’s “devastating” failure, citing rising interest rates and escalating withdrawal demands as major factors in its death.
The bank was forthcoming about regulator worries about its risk management and working to address problems when an “unprecedented” bank run led to its collapse, as Becker documented in prepared testimony announced on Monday by the Senate Banking Committee.
“The takeover of SVB has been personally and professionally devastating, and I am truly sorry for how this has impacted SVB’s employees, clients and shareholders,” he voiced.
Becker’s accounts differ from those of regulators and banking industry executives who condemned SVB’s leadership for its failure to mitigate interest rate risk or expand its business beyond the highly concentrated tech division in the Bay Area.
Becker said he did not trust “that any bank could survive a bank run of that velocity and magnitude.” He also declined regulators’ assertions that SVB failed to control interest rate risks, stating that until late 2021, the Federal Reserve had suggested that interest rates would remain low and that increasing inflation was just transitory.
Fed supervisors did not fully comprehend the difficulties at SVB and neglected to raise flaws even after they were recognized, according to a study released last month by the regulator.
Becker, former co-founder and Chairman Scott Shay, and former President Eric Howell are expected to summon before the Senate Banking Committee on Tuesday at 10 a.m. EDT (14:00 GMT). They will appear in public for the first time since their companies went bankrupt.
According to additional evidence, former officials of New York-based Signature Bank, which also collapsed in March, claimed the bank might have survived if authorities had not opted to liquidate it.
The failure of Signature was driven by “poor management” and a pursuit of “rapid, unrestrained growth” with no concern for risk management, according to the Federal Deposit Insurance Corp (FDIC).
California banking regulators galloped to close SVB on March 10 after depositors took out $42 billion in 24 hours. Regulators shut down SVB after two days.
TUESDAY HEARING
The hearing will be the initial opportunity for lawmakers to press the three executives.
Some of the lawmakers have also reprimanded Becker for awarding incentives and inquired if he and others gained from stock sales before SVB’s failure.
Becker justified the transactions in his testimony, alleging that he sold shares underlying his stock options on a regular basis as part of a scheme.
Bank regulators will also testify before Congress in a separate House of Representatives session on Tuesday. Lawmakers are likely to scrutinize their monitoring of the institutions, how they handled the problems, and their decision to facilitate the sale of struggling First Republic Bank to JPMorgan earlier this month.