SVB Group files for bankruptcy
SVB Financial Group, the parent company of Silicon Valley Bank (SVB), announced on the 17th that it has filed for bankruptcy by Chapter Eleven in the United States Bankruptcy Court for the Southern District of New York. Going forward, the company plans to carry out business reconstruction procedures under the supervision of the authorities.
SVB Financial Group will explore options such as sale of its business and assets. Of the businesses, the funds and general partner entities of SVB Securities and SVB Capital will not be subject to the bankruptcy filing because they are separate legal entities from SVB Financial Group, and will continue to operate normally.
The group says it currently has about ¥290 billion (about $2.2 billion) in liquidity. At the end of last year, it had total assets of about 28 trillion yen ($209 billion). The company said it will file additional documents regarding the bankruptcy proceedings in the coming days.
Chapter 11 of the U.S. Bankruptcy Code (Chapter 11)
A reconstruction-type bankruptcy legal system similar to the Civil Rehabilitation Law of Japan. The company will be restructured by reducing debts while continuing to operate. Debt collection will be suspended after the application, and the debtor will work on debt consolidation and formulate a reconstruction plan within 120 days in principle.
SVB sold to Goldman Sachs after a portfolio of government bonds and mortgage-backed securities it held fell due to rising interest rates. As a result, it has lost about 240 billion yen ($1.8 billion).
After that, in order to compensate for this, it tried to raise about 300 billion yen ($2.25 billion) in common stock and preferred convertible stock, but customers worried about bankruptcy rushed to withdraw, resulting in about 5.5 in a day. Trillion yen ($42 billion) of funds flowed out. I had to close my business.
to hold public hearings
House Financial Services Committee Chairman Patrick McHenry and his colleagues announced yesterday that a bipartisan hearing by regulators will be held on March 29 following the failures of SVB and Signature Bank.
Chairman McHenry explained that the Commission is currently making every effort to find out the truth about the bankruptcies of the two banks.
The hearing will help us understand why and how Silicon Valley Bank and Signature Bank failed.
We at the Banking Commission take seriously the task of supervising financial institutions. Understanding the causes of failure is necessary to protect depositors, support the safety and health of America’s banks, and strengthen the financial system.
Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg and Federal Reserve (Fed) Deputy Supervisory Chairman Michael Burr will testify at the hearing. Barr will report on the Fed’s oversight and regulation of Silicon Valley banks.
Debate over virtual currency
Bernie Frank, a former member of Congress and a member of the Signature Bank board, said Signature Bank had enough assets that it didn’t need to shut down. It is a form of opinion that New York authorities have suspended the bank to send a message that crypto assets (virtual currencies) are dangerous.
Signature Bank is known for offering U.S. dollar deposits to cryptocurrency companies. Tom Emmer, a cryptocurrency supporter, criticized Frank’s allegations, saying, “If true, closing signature banks is inappropriate.”
Emmer also disputed the view by some lawmakers that the bank went bankrupt because of the dangers of cryptocurrencies. He said that “rising interest rates had more to do with it than the volatility of cryptocurrencies.”
Public hearings are expected to be held as often as necessary. There is a possibility that the situation surrounding the connection with the virtual currency industry will also be discussed.
In addition, Reuters reported that the FDIC imposes a “requirement prohibiting the continuation of business relationships with virtual currency customers” to companies that acquire Signature Bank, citing information from related sources, but the FDIC reported that deny this.
It does not impose such requirements and reiterates that it does not intend to ban certain activities by banks.
connectionUS Congressman questions FDIC over signature bank closure