Home » News » Silicon Valley Bank: parent company, CEO and CFO face lawsuit in the wake of market turmoil

Silicon Valley Bank: parent company, CEO and CFO face lawsuit in the wake of market turmoil

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A locked door to a Silicon Valley Bank (SVB) location on Sand Hill Road is seen in Menlo Park, California (Reuters) Shareholders have filed a lawsuit against SVB Financial Group, two of its senior executives, and the collapse of Silicon Valley Bank, as Tuesday's stock market volatility persisted despite assurances from US Vice President Joseph Biden. The Silicon Valley Bank unit of SVB Financial Group is "especially sensitive" to a bank run, according to the bank's shareholders, who accuse chief executive Greg Becker and chief financial officer Daniel Beck of hiding this fact. In the federal court in San Jose, California, the proposed class action was submitted on Monday. The Silicon Valley Bank (SVB), which US regulators seized on 10 March after a spike in deposit withdrawals, appears to be the subject of the first of several lawsuits that are almost certainly going to be filed. The announcement came as the impact of the SVB collapse continued to shake global bank stocks on Tuesday, with calls for calm from Biden and other politicians failing to soothe the markets and leading some analysts to reevaluate their outlook on interest rates.

“Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed,” Biden said on Monday.

Investor concerns about a possible banking sector contagion were not allayed by Biden's remarks or emergency US efforts to guarantee the deposits of SVB's clients and support banks by providing them access to additional liquidity. On Tuesday, banking stocks in Asia continued to plummet, with Japan's banking subindex leading the collapse with an early drop of 6.7% to its lowest level since December.

“Bank runs have started [and] interbank markets have become stressed,” said Damien Boey, chief equity strategist at Sydney-based investment bank Barrenjoey. “Arguably, liquidity measures should have stopped these dynamics but Main Street has been watching news and queues – not financial plumbing.”

Rating agency Moody's on Monday cut the debt ratings of the bankrupt Signature Bank deep into junk territory and placed the ratings of six additional US banks under evaluation for a downgrade. [caption id="attachment_113977" align="aligncenter" width="954"]Silicon Valley Bank Silicon Valley Bank (Image credit : BusinessToday)[/caption] First Republic Bank, Zions Bancorporation, Western Alliance Bancorp, Comerica Inc, UMB Financial Corp, and Intrust Financial Corporation were the banks under review for downgrading. Future ratings for the failed bank were also being withdrawn, according to Moody's, which gave the subordinate debt of Signature Bank a "C" grade. The Santa Clara, California-based SVB was sued on Monday by shareholders led by Chandra Vanipenta, who claimed that SVB failed to explain how rising interest rates will threaten its business model and leave it worse off than banks with diverse clientele. Two days prior, SVB shocked the market by revealing a $1.8 billion after-tax loss from investment sales and its intention to seek cash as it rushed to accommodate client requests for access to their deposits. Before it failed, SVB had $175.4 billion in deposits and an estimated $209 billion in assets, making it the biggest US bank failure since the 2008 financial crisis. Its failure has raised concerns that other banks may be exposed to higher interest rates due to decreasing bond values. Investors in SVB between 16 June 2021 and 10 March 2023 are seeking specific damages in the complaint. SVB announced on Monday that it will investigate strategic alternatives for the company's remaining operations after the removal of its primary banking division. Tim Mayopoulos, a former official at Fannie Mae, was appointed CEO of Silicon Valley Bank by the FDIC on Monday. According to TechCrunch, Mayopoulos informed clients that the bank is "doing business as usual" in a statement.

By Awanish Kumar

I keep abreast of the latest technological developments to bring you unfiltered information about gadgets.

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