(New York) The rapid spread online of rumors following the announcement of measures intended to strengthen Silicon Valley Bank (SVB) precipitated its fall, said Monday Greg Becker, who headed the establishment when it went bankrupt.
“No bank could have survived a banking panic of such speed and such magnitude”, advances the former general manager of the establishment in a text submitted on the eve of his hearing before a parliamentary committee to the UNITED STATES.
This is the first time he has spoken publicly since the authorities took control of SVB on March 10.
According to him, the American central bank (Fed) first put SVB in difficulty by suddenly raising interest rates from 2022, to fight against inflation.
This mechanically lowered the value of the many treasury bills the bank had purchased as a low-risk investment.
When SVB announced on March 8 its intention to sell part of its portfolio of financial securities and raise capital, the idea was to “strengthen the bank’s capital position and reposition the portfolio for new market conditions”. , explained Greg Becker.
But the same evening, a bank with strong ties to the cryptocurrency industry, Silvergate, announced its liquidation. However, an article had earlier compared the two establishments, even if only 3% of SVB’s deposits came from the world of digital currencies.
“The fall of Silvergate and the link to SVB caused rumors and misconceptions to spread rapidly online, leading to the start of what would become an unprecedented bank run,” Greg Becker said.
The next day, the bank’s customers were withdrawing $42 billion in ten hours.
Two days later, requests for the withdrawal of approximately 100 billion additional dollars were filed, prompting the authorities to intervene and take control of SVB.
The biggest bank run before, the one that brought down Washington Mutual in 2008, saw the withdrawal of $19 billion in 16 days, according to the Fed.
In the wake of SVB’s setbacks, another bank largely focused on the cryptocurrency sector, Signature Bank, was quickly affected by massive withdrawals and was seized on March 12 by the authorities.
Two former executives of Signature Bank are also due to testify before the parliamentary committee on Tuesday.
In a text published Monday, its co-founder Scott Shay assures that his establishment was “well capitalized” and “solvent”. “I thought the bank was well positioned to weather the storm but regulators obviously saw things differently,” he wrote.