The US Department of Justice has opened an investigation into the bankruptcy of Silicon Valley Bank (SVB), specifically targeting recent stock sales by a number of the bank’s leaders, US media reported Tuesday, citing sources close to the file.
The Wall Street Journal reported that the US Securities and Exchange Commission, which oversees financial markets (SEC), launched this investigation.
She added that the investigations are still in a preliminary stage and may not lead to formal charges.
The factor that accelerated the bankruptcy of Silicon Valley Bank, which is close to startups, is the withdrawal of very large sums by clients who have more than $250,000 in their accounts, which is the maximum amount guaranteed by the Federal Deposit Insurance Corporation (FDIC).
On Friday, the bank was placed under the supervision of this institution, which constituted the largest bank bankruptcy in the United States since the financial crisis of 2008.
To confirm the strength of the banking system, the authorities indicated, on Sunday, that all bankrupt bank deposits would be guaranteed.
Surprise.. the password of the crisis
- The crisis began following the Silicon Valley Bank, founded in 1983 to finance technology and emerging companies, exceeded the maximum deposit size target in a bank strategy last year.
- The bank’s deposits have quadrupled over the past four years, and the volume of loans has increased from $23 billion to $66 billion.
- This surge in deposits prompted the bank to invest in US Treasury bonds and mortgages by regarding $128 billion, with fixed returns of 1.5 percent.
- With the US Federal Reserve tightening monetary policy and raising interest rates as a result of the Ukraine war, the difference between the returns that the bank obtains from bonds and the interest rates that must be paid on deposits has widened.
- All this coincided with a widespread recession in the technical sector in which the bank’s work specializes. Finally, it did not succeed in achieving the target percentage of lending, which reflected negatively on returns.
- The surprising thing is that all this happened, although at the end of 2022 the bank became solvent, as it had $175 billion in deposits and $209 billion in total assets.
