March 11, 2023 / VOLUME NO. 252

Mistakes Were Made

My heart goes out to the team at SVB Financial Group — the parent company of Santa Clara, California-based Silicon Valley Bank.

CEO Greg Becker and his team each had decades of experience in banking, were wildly successful bankers and had become the venture capital industry’s leading bank before the Federal Deposit Insurance Corp. made the decision Friday to put the $209 billion institution into receivership after what appears to have been a classic bank run. It was the largest bank failure since 2008. Sure, the markets and investors will pick apart decision-making in the last few years and months, and for sure, mistakes were made. 

For one, the bank’s business was concentrated on Silicon Valley start-ups and venture capital firms. A lot of those startups and venture firms used SVB for their operating accounts, carrying balances that exceeded the FDIC’s $250,000 insurance limit. At the end of 2022, the bank reported the $151.5 billion in uninsured domestic deposits and $13.9 billion in foreign deposits; an amount that surely has fallen in recent days. The bank had about $175 billion in deposits at closure. 

Compounding that deposit dynamic were interest rates, which impacted both depositors and its own bond book. Under pressure, SVB tried to raise capital and sell a huge portfolio of bonds — $21 billion from its securities portfolio at an estimated $1.8 billion loss.

But this was no fly-by-night crypto bank headed toward oblivion. Becker has spent his entire career in banking. SVB had been around for 40 years, and Becker worked for the bank for close to 30 of them. His executive team have impressive resumes from some of the world’s largest banks, including Capital One Financial Corp., Citigroup and Bank of the West. SVB was well capitalized. Its asset quality was solid.

“We are experienced at navigating market cycles and are well positioned to serve our clients through market volatility, with a high-quality, liquid balance sheet and strong capital ratios,” wrote Becker in a letter to stakeholders two days before the bank failed. 

Numerous news outlets, such as CNBC and The Wall Street Journal, have reported that venture capital firms began urging their contacts to withdraw deposits in the last several days, apparently leading to a mad rush on the bank. But I can’t help but wonder what Becker thought as he saw the start-ups and VC firms flee his bank, the same firms SVB had supported for so long, despite the ups and downs of venture capital. He believed in them. It must have been a heart-wrenching.

Naomi Snyder, editor-in-chief for Bank Director

FDIC Staffing Shortages Could Impact Banks

One-fifth of the workforce of the Federal Deposit Insurance Corp. was eligible to retire in 2022 and examiners-in-training are resigning at significantly higher rates, according to a new report from the agency’s inspector general.

“Without strategic workforce planning, retirements and resignations could result in the FDIC experiencing mission-critical skills and leadership gaps.”

— Office of Inspector General, Federal Deposit Insurance Corp.

• Kiah Lau Haslett, managing editor for Bank Director

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