New York, March 14 A blame game is on for who caused the Silicon Valley Banks (SVB) collapse, and the tech sector is pointing the finger at CEO Greg Becker for allowing his company to go down in history as the second-biggest US banking failure on record.
One SVB employee was dumbfounded by how Becker publicly acknowledged the extent of the bank's financial troubles before privately lining up the necessary financial support to ride out the storm, CNN reported.
This set the stage for the panic that ensued as customers scrambled to pull their money.
"That was absolutely idiotic," the employee, who works on the asset management side of Silicon Valley Bank, told CNN in an interview.
"They were being very transparent. It's the exact opposite of what you'd normally see in a scandal. But their transparency and forthright-ness did them in."
Becker and his leadership team revealed on the night of March 8 a hope (but no firm commitment) to raise $2.25 billion in capital as well as $21 billion in asset sales that sparked a $1.8 billion loss.
That news set off a wave of fear across Silicon Valley, where the bank serves as a key lender to tech startups.
Many of them panicked, yanking $42 billion on March 9 alone when SVB's stock crashed by 60 per cent, according to filings by California regulators.
"People are just shocked at how stupid the CEO is," the SVB insider told CNN.
"You're in business for 40 years and you are telling me you can't raise $2 billion privately? Get on a jet and fly to Kuwait like everyone else and give them control of one-third of the bank."
Jeff Sonnenfeld, CEO of the Yale School of Management's Chief Executive Leadership Institute (CELI), told CNN he agrees that Silicon Valley Bank's leadership deserves criticism for their "tone-deaf, botched execution."
"Someone lit a match and the bank yelled, 'Fire!', pulling the alarms in earnest out of genuine concern for transparency and honesty," Sonnenfeld and Steven Tian, CELI's research director, said not only was the announcement of an unsubscribed $2.25 billion capital raise "unnecessary" because SVB had sufficient capital far in excess of regulatory requirements, but there was no need to simultaneously reveal the $1.8 billion loss.
Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor