Tuesday, March 14, 2023 8:40 a.m.
The parent company of Bank of Silicon Valley and two of its top bosses are being sued by shareholders who have accused them of hiding the lender’s vulnerabilities to the effects of rising interest rates.
Shareholders of the Nasdaq-listed company have filed a class action lawsuit against SVB, its chief executive Greg Becker and its chief financial officer Daniel Beck for failing to disclose that the rate hikes made the bank “particularly vulnerable” to a bank run.
The lawsuit is likely to be the first in a wave of action in the United States against the bank as the fallout from its collapse eases after a run on Friday.
Silicon Valley Bank had about $209 billion in assets and $175.4 billion in deposits before it collapsed in the biggest U.S. bank failure since the 2008 financial crisis.
SVB spooked investors on Wednesday by disclosing a $1.8 billion after-tax loss from the sale of its loss-making bond portfolio and announced a stock sale to fill the gap. The announcement sent stocks soaring and sparked a rush by start-ups to withdraw their assets.
Silicon Valley Bank had about $209 billion in assets and $175.4 billion in deposits before it collapsed in the biggest U.S. bank failure since the 2008 financial crisis.
Its collapse has raised fears of contagion among other lenders who also cater to wealthy clients, including tech start-ups and venture capital-backed companies, as well as large regional banks in the United States.
In Monday’s lawsuit, shareholders led by Chandra Vanipenta said Santa Clara, Calif.-based SVB failed to disclose how rising interest rates would undermine its business model and leave it worse off. than banks with different clienteles.
The lawsuit seeks unspecified damages for SVB investors between June 16, 2021 and March 10, 2023, Reuters reported. SVB said on Monday it would explore strategic alternatives for what remains of the company, now deprived of its main banking business.
The lawsuit came as new Silicon Valley Bank boss Tim Mayopoulos told bank customers on Monday that the lender was back up and running as usual.
US regulators rushed to take control of the US bank over the weekend and appointed new chiefs to oversee the business.
The United States Federal Deposit Insurance Corporation had used the former Fannie Mae leading Mayopoulos as CEO of the newly created entity, named Silicon Valley Bank NA, after the regulator took control of SVB following its collapse that crippled bank stocks globally.
Dsettles down after the SVB UK crisis
UK subsidiary of Silicon Valley Bank, SVB United Kingdomsaid it was preparing to ‘return to normal operations’ yesterday after being acquired by HSBC in an eleventh-hour deal yesterday morning.
Bosses have warned that some customers could face delays in the coming days. A tech chief interviewed by City AM said he still couldn’t access his money around 1pm yesterday.
The bank bailout was widely hailed as a success story for the UK governmentwith tech groups yesterday hailing the 72-hour rescue effort from the Treasury, regulators and the private sector over the weekend.
“It was a fantastic example of private and public entities working together to solve a problem,” said Tech Nation leader Gerard Grech. AM City. in an interview.
Reporting by Jonathan Stempel, Reuters