Shareholders have filed a class action lawsuit against SVB Financial Group, the parent company of Silicon Valley Bank, and two of its top executives over the collapse of the tech-focused lender.
The lawsuit alleges that CEO Greg Becker and CFO Daniel Beck concealed information regarding the impact of rising interest rates on the bank and failed to disclose that the bank was “particularly susceptible” to a bank run.
As interest rates increased, the bank’s bond portfolio lost value, leading to a run on the bank that resulted in a loss of $1.8bn.
The bank sought to raise $2.25bn through a new share offering to address its liquidity problems, but customers began withdrawing their deposits.
The proposed class action was filed in federal court in San Jose, California, amid a global sell-off of financial stocks that saw a $465bn loss over two days. Despite the crisis, US President Joe Biden has reassured Americans that the banking system is safe, and the Federal Deposit Insurance Corporation has appointed Tim Mayopoulos as the new CEO of Silicon Valley Bank, who has promised that the bank will continue its operations as usual.
SVB Financial Group has yet to comment on the matter.
Investors are reducing their investments in financial stocks worldwide, causing a $465bn decrease in market value over two days after Silicon Valley Bank’s collapse. The MSCI Asia Pacific Financials Index fell to its lowest level since November, with Mitsubishi UFJ Financial dropping 8.6% in Japan, Hana Financial falling 3.9% in South Korea, and ANZ losing 1.5% in Australia.
Financial institutions are concerned about the impact of SVB’s collapse on their investments in bonds and other instruments.
Due to the banking system’s turmoil, Treasury yields have fluctuated, and the Federal Reserve is expected to hold off on raising rates. According to Credit Suisse’s chief investment officer for Asia-Pacific, John Woods, the financial markets are uncertain and need to know the broader impact of SVB’s collapse. The aggregate market value of companies in the MSCI World Financials Index and the MSCI EM Financials Index has dropped about $465bn since Friday.
