Good Governance: Where was the supervisory committee at Silicon Valley Bank?
Six key governance takeaways for credit unions from the recent U.S. bank failures
Recent bank failures in the United States have raised concerns with individuals and businesses alike. On March 10, 2023, Silicon Valley Bank failed after a bank run, marking it the third-largest bank failure in United States history and the largest since the 2007-2008 financial crisis. It was one of three U.S. bank failures in March.
A commercial bank founded in 1983 and headquartered in Santa Clara, California, SVB was, at its collapse, the 16th largest bank in the U.S. by total assets and heavily skewed toward serving companies and individuals from the technology industry. Numerous U.S. venture capital-backed healthcare and technology companies were financed by SVB. Companies such as Airbnb, Cisco, Fitbit, Pinterest and Block Inc. have been clients of the bank.
In addition to financing venture-backed companies, SVB was well known as a source of private banking, personal credit lines and mortgages for tech entrepreneurs; it specialized in lending money to higher-risk newly formed companies. SVB required an exclusive relationship with those borrowing from the bank, meaning that SVB was the only bank these clients used, which increased the risk for the clients and the bank.
The review of the Board of Governors of the Federal Reserve System from April 28, 2023, states:
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