SVB Financial Group and two top executives have been sued by shareholders over the collapse of Silicon Valley Bank, as global stocks continued to suffer on Tuesday despite reassurances from US President Joe Biden.
Bank shareholders accuse SVB Financial Group Chief Executive Greg Becker and Chief Financial Officer Daniel Beck of concealing how raising interest rates would leave their Silicon Valley Bank unit “particularly susceptible” to a run on banks .
The proposed class action lawsuit was filed Monday in federal court in San Jose, California.
It appeared to be the first of many potential lawsuits over the demise of Silicon Valley Bank (SVB), which US regulators seized on March 10 after a flurry of deposit withdrawals.
The news came as shockwaves from the SVB collapse hit global banking shares further on Tuesday, with calls for calm from Biden and other policymakers doing little to reassure markets and prompting some analysts to rethink. your perspective on interest rates.
“Americans can rest assured that our banking system is secure. Your deposits are safe. Let me also assure you that we will not stop at this. We will do whatever it takes,” Biden said Monday.
Biden’s comments, along with US emergency measures to guarantee deposits for SVB clients and prop up banks by giving them access to additional funding, failed to allay investor concerns about possible contagion across the board. the banking sector.
Bank shares in Asia extended the declines on Tuesday, with Japan’s banking sub-index leading the decline, falling 6.7% in early trading to its lowest level since December.
“Bank runs have begun [and] interbank markets have been stressed,” said Damien Boey, chief equity strategist at Sydney-based investment bank Barrenjoey. “Arguably liquidity measures should have stopped this dynamic, but Main Street has been watching news and tails, not financial plumbing.”
Ratings agency Moody’s on Monday downgraded the debt ratings of Signature Bank that has tumbled deep into junk territory and placed the ratings of six other US banks on review for downgrade.
The banks placed under review for the downgrade were First Republic Bank, Zions Bancorporation, Western Alliance Bancorp, Comerica Inc, UMB Financial Corp and Intrust Financial Corporation.
Moody’s, which rates Signature Bank’s subordinated debt a “C,” said it was also withdrawing future ratings on the collapsed bank.
In Monday’s lawsuit, shareholders led by Chandra Vanipenta said Santa Clara said California-based SVB failed to disclose how raising interest rates would undermine its business model and leave it worse off than banks with different customer bases.
SVB had shocked the market two days earlier by disclosing a $1.8 billion after-tax loss on investment sales and that it planned to raise capital as it struggled to meet customer demands for access to their deposits.
SVB had assets worth $209 billion and deposits worth $175.4 billion before its bankruptcy, in the biggest failure of a US bank since the 2008 financial crisis.
Its collapse has raised fears that other banks may be vulnerable to rising interest rates through excessive exposure to falling bond prices.
The lawsuit seeks unspecified damages for SVB investors between June 16, 2021 and March 10, 2023.
SVB said on Monday it will explore strategic alternatives for what remains of the company, now divested of its core banking business.
On Monday, the FDIC named Tim Mayopoulos, the former boss of Fannie Mae, as CEO of Silicon Valley Bank. According to TechCrunch, a statement sent by Mayopoulos to clients said the bank is “conducting business as usual.”