Only a few days later Bank of Silicon Valley failed, the CEO of Sweden’s largest pension fund says the company made a mistake investing in some US banks. “Obviously with what happened,” Alecta CEO Magnus Billing told Bloomberg. in March, “we think this is a big failure for us as an investor, and we need to learn from it and take action based on the lessons learned.” A few weeks later, Alecta’s board agreed with Billing, firing him today “with immediate effect.” The error was, of course, almost $2 billion loss on Silicon Valley Bank and Signature Bank, two of the three largest bank failures in U.S. history. Not only that, but Billing had also invested in Bank of the First Republicwho himself had a near death experience.
Alecta, the professional pension fund, manages about $115 billion in assets and is looking to bolster investor confidence with the firing of Billing. “The losses have seriously shaken confidence in Alecta’s asset management,” the group said in an official statement. “The board has now come to the conclusion that Alecta needs new leadership to implement the necessary changes in asset management and restore trust.”
Alecta began buying shares in the three US banks in 2017 and increased its holdings in subsequent years. In 2022, Alecta was the fourth shareholder of the parent company of SVB, the sixth at Signature and the fifth at First Republic.
The Swedish pension fund’s board has appointed deputy chief executive Katarina Thorslund as interim chief until a permanent replacement is appointed.
Banking rout: next?
Alecta is just the latest financial institution to be hit by the SVB implosion, which was the second biggest bank failure in history. The failure of the Santa Clara-based bank, prominent in tech and venture capital circles, came after a historic $42 billion in a single day bank rush. And while the immediate domino effect of SVB’s bankruptcy impacted other U.S. banks, First Republic faltering before regulators took over. historical milestone guarantee of uninsured deposits, it sparked a market uproar that quickly spread to other parts of the world, including Switzerland.
Days after SVB fell, Swiss banking giant UBS bought fellow countryman Credit Suisse for $3 billion after a run on the systemically important banking giant. Credit Suisse had its fair share of problems which investors, regulators and other banks knew about for years before the SVB episode, but something changed last month.
Experts have wondered about the potential impact of the bank rout for longer. Economist Mohamed El-Erian said economic contagion was possible due to an “erosion of trust” among consumers, and policymakers may not be able to stop it, while Jamie Dimon recently wrote that he sees the effects lasting for years, in his annual letter to JPMorgan shareholders.
Asset Manager CEO Larry Fink black rockcompared the SVB crisis to a “slow crisis” as the savings and credit crisis 1980s, although the true extent of damage to financial markets remains unclear in the case of SVB.
“We don’t yet know if the consequences of easy money and regulatory changes will ripple through the entire U.S. regional banking sector (similar to the S&L crisis) with more foreclosures and closures to come,” Fink wrote in a statement. letter to stakeholders last month. “It’s too early to know how extensive the damage is.”