Former SVB Head Criticised in US Senate Bank Failure Hearing

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Former SVB Head Criticised in US Senate Bank Failure Hearing: Former Silicon Valley Bank (SVB) CEO, Gregory Becker, along with former executives from Signature Bank, Scott Shay and Eric Howell, testified before the Senate Banking Committee on Tuesday, drawing outrage from senators over the collapse of their respective banks, questionable risk management practices, and excessive executive compensation.

Gregory Becker, making his first significant public appearance since the demise of SVB in March, defended the bank’s management and attributed its failure to a series of unforeseen and unprecedented events. However, government reports have placed blame on poor management, considering the rapid growth of both SVB and Signature Bank.

During the hearing, Louisiana Republican Senator John Kennedy confronted Becker, accusing him of making a “stupid bet” that went wrong when SVB ended a program to manage interest rate risk as the Federal Reserve changed its policy. Becker responded by stating that various unprecedented events had led to the bank’s downfall.

Georgia Democrat Senator Raphael Warnock pressed Becker on whether he should have made different decisions, to which Becker defended himself, claiming that he and other executives made the best choices based on the available information at the time.

When questioned about his compensation, which amounted to $40 million over the past four years, Becker shifted the responsibility to the bank’s board, emphasizing that the decision was made by them and deemed fair. He further emphasized that compensation matters were determined by the board of directors.

Senators from both sides criticized Becker and the Signature Bank executives for their failure to take responsibility for crucial decisions and their substantial compensation leading up to the banks’ collapses. Massachusetts Democratic Senator Elizabeth Warren called for legislation to be passed that would allow for the clawback of pay from bankers like Becker and Scott Shay, highlighting Becker’s successful lobbying in 2018 to weaken banking regulations.

Becker attributed SVB’s demise to a “social media-fueled” bank run, partly fueled by rumours, and also acknowledged the impact of the Federal Reserve’s abrupt shift in monetary policy in his written statement ahead of the hearing.

In conclusion, the Senate Banking Committee hearing on bank failures brought intense scrutiny to former executives of Silicon Valley Bank and Signature Bank. Executives faced tough questioning from senators regarding risk management practices, executive pay, and accountability for their banks’ collapses. The hearing highlighted concerns over the decision-making processes and compensation practices within the banking industry, prompting calls for legislative action to address these issues.

Source: Editorial Times