After Silicon Valley Bank’s seemingly sudden collapse and the tumultuous week that followed, board members and corporate leaders are asking: What happened? And, what’s next? Unimaginable events and black swan crises seem to be less unusual all the time, prompting many boards to focus more attention on risk.
In other news: Meta announces more layoffs and project cuts; Even on diverse boards, Latino directors are not proportionally represented; And Carl Icahn is in the news again as he sets his sights on Illumina.
In the Spotlight
An Overview of the Silicon Valley Bank Collapse
What happened, and could it have been prevented? The New York Times takes a thorough look at the events so far.
“Gregory Becker, the chief executive of Silicon Valley Bank…told the audience of investors…Tuesday afternoon that the future of the tech industry was sparkling — and so was Silicon Valley Bank’s place within it. What he didn’t say was that, roughly a week earlier, the rating agency Moody’s had called to tell Mr. Becker that his bank’s financial health was in jeopardy, and its bonds were in danger of being downgraded to junk.” THE NEW YORK TIMES
The SEC and Justice Department Launch Investigation into SVB
Several bank executives sold shares of the bank in the weeks prior to the crisis.
“For example, under a prearranged plan, Silicon Valley Bank’s former chief executive, Gregory Becker, exercised options in late February that permitted him to sell shares worth about $3 million for around $287 a share; the sales were disclosed in a regulatory filing on March 1. The filing also shows that the stock trading plan was set up on Jan. 26 when shares of the bank closed at $296.” THE NEW YORK TIMES
Signature Bank: An “Old School” Institution Undone By Crypto
On the surface, Signature Bank might seem like an identical domino falling. But its struggle was a different sort.
“It was the third-largest bank failure in the US ever, behind Washington Mutual in 2008 and Silicon Valley Bank’s cataclysmic drop days ago. But (Signature) wasn’t a national giant or a new-fangled tech star, it was old school…The firm had overcome setbacks including questions over dealings with Donald Trump’s inner circle, rampant lending to cab owners and even accusations of funding slumlords…Then a big pivot to crypto changed the lender’s focus — and its fate.” BLOOMBERG
HSBC Buys UK Arm of SVB
In a frantic quest to find a buyer for SVB, HSBC stepped up to acquire the bank’s UK business.
“HSBC, the biggest bank in Europe, agreed to buy the U.K. unit of Silicon Valley Bank in a deal brokered by the British government and the Bank of England…‘This acquisition makes excellent strategic sense,’ said HSBC Chief Executive Officer Noel Quinn. ‘It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors.’” BARRONS
Big Banks See Flood of New Deposits
Institutions deemed “Too big to fail” saw a rush of depositors hoping to safeguard their assets.
“After the back-to-back collapse of three smaller banks, their biggest US counterparts are seeing a rush of depositors fearful the crisis will spread. JPMorgan Chase & Co., the largest US bank, alone received billions of dollars in recent days, and Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. are also seeing higher-than-usual volume…Representatives for the firms declined to comment or didn’t respond to messages.” BLOOMBERG
Fed Rate Pivot is Back in Play
The Fed is weighing options in the wake of the crisis, in terms of both rates and a return to tighter regulations for regional banks.
“Suddenly, it feels like we’ve been catapulted into an obscene combination of the dot-com bubble and the global financial crisis. There were many weekends spent waiting to find out how regulators resolved the fate of a failing bank back in 2008; it’s not great to return to them.” BLOOMBERG
Fed Weighs Tougher Rules
“The Federal Reserve is considering changes to its oversight of mid sized banks following the collapse of three lenders in the past week…Regulators at the US central bank are weighing rules that could bring capital and liquidity thresholds closer to strictures that the largest Wall Street firms face. One change under consideration could impact so-called stress tests, an exercise that examines lenders’ ability to withstand a crisis.” BLOOMBERG
From Boardspan this Week:
Navigating Disruptive Risk
Every company is susceptible to risks that are potentially disruptive to operations and the future. Knowing how to navigate these risks is invaluable for boards.
"Envisioning a company’s future is hard and imprecise work. But it’s increasingly clear that dedicating time to think about the future is vital to navigating the disruptive risks that are shaking up industries and upending business models. Here we explore the topic of disruptive risks—such as technological innovation, the Internet of Things, the digital economy, demographic changes, and ecosystem changes—that may threaten the core assumptions underlying a company’s strategy and business model.” KPMG via LINKEDIN
