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US lawmakers probe alleged favouritism in Silicon Valley Bank collapse
Two lawmakers in the United States, Senator Elizabeth Warren and Reps member, Alexandria Ocasio-Cortez, have questioned the working relationship between Silicon Valley Bank (SVB) and its top depositors or clients.
The lawmakers said the unusual cosy relationship with its clients could have resulted in benefits for the latter in exchange for holding their capital in SVB.
This was revealed in a report by CNBC on Monday, which quoted letters written to 14 substantial depositors of SVB, comprising Roblox, BlockFi and Roku.
Recall that Ripples Nigeria had reported that Silicon Valley Bank collapsed due to bad investment in U.S bonds and its capital base which made it impossible for SVB to meet depositors’ demand.
Part of the letter written by Warrens reads: “Silicon Valley Bank’s unusually cozy relationship with its clients increased the threat of contagion when the bank went under.”
She added that there’s a need to know how “these mutual backscratching arrangements developed, who benefited from them, and what role they played in Silicon Valley Bank’s failure.”
READ ALSO:Silicon Valley Bank’s collapse crashes stablecoin, USDC to all-time low
The legislator asked the top depositors, who account for $13.3 billion in deposits, to reveal the benefits they received from SVB before the bank failed.
It was revealed that startup founders, who could obtain loans from other banks, received lower interest mortgage rates. Also, generous lines of credit were offered to startup founders.
Other benefits alleged to have been exchanged are all sponsored ski trips, conferences and fancy dinners, the lawmakers said in the letters.
The lawmakers further stated: “If the reports are accurate, these mutual backscratching arrangements could help explain why some customers placed massive, uninsured deposits at SVB.”
“And if these deposits were made by company executives and allowed by corporate boards in exchange for personal perks, that behavior raises potential concerns about whether they were meeting their fiduciary duties,” they wrote in the letters.
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