Friday, March 24, 2023

US authorities open investigation into SVB bank collapse

The United States Department of Justice opened an investigation seeking responsibility for the fall of Silicon Valley Bank (SVB), one of the largest bank collapses in the country’s history, local media reported Tuesday.

Sources from the Department of Justice and the Securities and Exchange Commission (SEC) cited by the US press indicated that the investigations are in their initial phase.

According to The Wall Street Journal, the investigation could point to two senior managers of the SVB financial institution, its CEO, Greg W. Becker, and its chief financial officer, Daniel Beck, for having sold company shares just a week before it collapsed.

With a poorly diversified and highly interconnected client base, the bank suffered a dizzying bank run that on Friday forced regulators to step in and close the bank to limit the damage.

The panic spread to other firms and by Sunday it had also swept away New York-based Signature Bank, which in recent years had made a significant commitment to the cryptocurrency sector.

After seizing control of the SVB on Friday and unsuccessfully seeking to sell it to another bank, US regulators on Sunday opted to guarantee all deposits held by both banks, beyond the standard limit of $250,000 per client, in order to contain panic and allow affected businesses to continue operating.

The intervention of the authorities has generated a strong debate in the United States about whether or not this constitutes a new bank bailout, as occurred in the 2008 crisis.

The president of the United States, Joe Biden, said on Monday that the managers responsible for this crisis will lose their jobs and that investors will not be protected: “They knowingly took a risk and when the risk fails, investors lose their money. That’s how capitalism works.”


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