Silicon Valley Bank Reportedly Accelerated Insider Loans in Last Months
Silicon Valley Bank began giving more loans to insiders after regulators identified some bank weaknesses.
As Fed examiners saw that Silicon Valley Bank needed to better track interest rate risks late last year, the bank’s loans to officers, directors, principal shareholders and their related interests tripled in the fourth quarter compared to those in the previous quarter, Bloomberg reported Wednesday (March 22).
That 300% surge in loans took place at a time when loans in other categories were growing by about 3%, and the dollar amount of insider loans reached a level higher than any seen at the bank in the past 20 years, according to the report.
There have been no allegations of wrongdoing connected to the loans, and the loans were made with terms similar to those given to other customers, the report said.
The Federal Deposit Insurance Corporation (FDIC) — which was appointed as receiver of the bank March 10 — did not immediately reply to PYMNTS’ request for comment.
Silicon Valley Bank’s report March 9 that it had a $1.8 billion after-tax loss on its sale of investment touched off a 60% drop in its share price that day and a 68% premarket plunge the next morning before trading was halted.
Later that day, March 10, a California state financial regulator took possession of the bank and appointed the FDIC as its receiver, citing Silicon Valley Bank’s “inadequate liquidity and solvency.”
These actions impacted hundreds of startups and venture capital firms that did their banking and kept billions of dollars with the bank, which had said on its website that it is “the FinTech industry banking leader.”
The FDIC is now operating the bank while also looking to sell it and said Monday (March 20) that it has extended the bidding process.
“There has been substantial interest from multiple parties, and the FDIC and the bidders need more time to explore all options in order to maximize value and achieve an optimal outcome,” the FDIC said at the time.
In addition, the House Financial Services Committee will hold what lawmakers indicated will be the first of many hearings on the failures of Silicon Valley Bank and Signature Bank March 29.