By Charlie Conchie
The parent company of Silicon Valley Bank 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 in the Nasdaq-listed firm filed a class action against SVB, its chief executive Greg becker and chief financial officer Daniel Beck for not disclosing that rate hikes had left the bank “particularly susceptible” to a bank run.
The lawsuit is likely to be the first of a wave of action in the US against the bank as the fallout of its collapse settles following a run on Friday.
Silicon Valley Bank had an estimated $209bn of assets and $175.4bn of deposits before its collapse, in the largest U.S. bank failure since the 2008 financial crisis.
SVB had spooked investors on Wednesday by disclosing a $1.8bn after-tax loss from the sale of its loss-making bond portfolio and announced a share sale to plug the gap. The announcement sent shares spiralling and sparked a rush from start-ups to withdraw assets.
Silicon Valley Bank had an estimated $209bn of assets and $175.4bn of deposits before its collapse, in the largest U.S. bank failure since the 2008 financial crisis.
Its collapse has sparked fears of contagion among other lenders that also cater to wealthy clients, including technology start-ups and venture capital-backed companies, as well as large regional banks in the US.
In Monday’s lawsuit, shareholders led by Chandra Vanipenta said Santa Clara, California-based SVB failed to disclose how rising interest rates would undermine its business model, and leave it worse off than banks with different client bases.
The lawsuit seeks unspecified damages for SVB investors between June 16, 2021 and March 10, 2023, Reuters reported. SVB said on Monday it will explore strategic alternatives for what remains of the company, now shorn of its main banking business.
The lawsuit came as Silicon Valley Bank’s new boss Tim Mayopoulos on Monday told the bank’s clients that the lender was back up and running and conducting business as usual.
US regulators swooped in to take control of the US bank over the weekend and have appointed new chiefs to oversee the firm.
The U.S. Federal Deposit Insurance Corporation had tapped former Fannie Mae head Mayopoulos as CEO of the newly created entity, named Silicon Valley Bank N.A, after the regulator took control of SVB following its collapse that crippled banking stocks globally.
Dust settles after SVB UK crisis
Silicon Valley Bank’s UK subsidiary, SVB UK, said that it was gearing up to “resume normal operations” yesterday after being snapped up by HSBC in an eleventh hour deal yesterday morning.
Bosses warned that some customers may face delays in the days ahead. One tech chief spoken to by City A.M. said they had still not been able to access their cash at around 1pm yesterday.
The rescue of the bank has largely been hailed as asuccess story for the UK government, with tech groups yesterday hailing the 72 hour rescue effort from Treasury, regulators and the private sector over the weekend.
“This was a fantastic example of private and public entities working together to solve an issue,” Tech Nation chief Gerard Grech told City A.M. in an interview.
Reporting by Jonathan Stempel, Reuters
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