Silicon Valley Financial institution’s former chief govt Greg Becker plans in charge an “unprecedented” run on deposits fuelled by “rumours and misconceptions” for the collapse of the lender, in response to testimony launched forward of a high-stakes congressional listening to.

In his first public look for the reason that collapse of SVB on March 10, which triggered the worst bout of banking turmoil for the reason that 2008 disaster, Becker is predicted to say that no lender “may survive a financial institution run of that velocity and magnitude”.

In accordance with pre-written testimony forward of a grilling on Tuesday in entrance of the Senate banking committee, Becker stated he was “devastated” by the collapse of SVB — which now ranks because the third-largest US financial institution failure — and “actually sorry” for the impression on employees, shoppers and buyers.

In feedback that might show uncomfortable for Goldman Sachs, Becker identified SVB had determined to promote a bit of its securities at a loss primarily based on recommendation from the Wall Avenue group, a transfer that spooked buyers and depositors.

The following financial institution run prompted regulators on the US Federal Deposit Insurance coverage Company to grab management of the financial institution. Goldman didn’t instantly reply to a request for remark.

“I by no means imagined that these unprecedented occasions may occur to SVB and strongly consider that the management group and I made the perfect selections we may with the information, forecasts, and outdoors skilled recommendation obtainable to us on the time,” wrote Becker, who ran SVB for 12 years.

The previous SVB chief additionally appeared to direct some blame on the US Federal Reserve and its incorrect prediction {that a} bounce in inflation beginning in 2020 can be “transitory”. Due to that “messaging”, SVB and different banks “invested of their securities portfolios”, Becker argued.

In the meantime, Becker took problem with an article within the Monetary Instances, printed in February, that reported SVB was dealing with scrutiny over its resolution to maneuver property into the securities portfolio, together with one other lender known as Silvergate. Silvergate determined to close down on March 8, two days earlier than the collapse of SVB.

“Silvergate’s failure and the hyperlink to SVB triggered rumours and misconceptions to unfold rapidly on-line, resulting in the beginning of what would turn into an unprecedented financial institution run,” wrote Becker.

He added: “The subsequent day, the financial institution run picked up steam. By the tip of the day on March 9, $42bn in deposits have been withdrawn from SVB in 10 hours, or roughly $1mn each second.”

The subsequent day the FDIC took possession of SVB, prompting one other $100bn of deposit withdrawals. That meant 80 per cent of complete deposits had disappeared in simply two days, the swiftest run on a financial institution in US historical past.

In a report launched late final month by the Fed, the US central financial institution blamed the failure of SVB on mismanagement by Becker and different executives, in addition to regulatory modifications made throughout the administration of Donald Trump and the failure of Fed supervisors to rapidly handle issues after they have been uncovered.

Former prime executives from Signature Financial institution, which was seized by regulators in parallel with SVB, are scheduled to look on the similar listening to as Becker on Tuesday.

In accordance with prewritten testimony, Scott Shay, former chair of Signature, plans to inform lawmakers that the FDIC was unsuitable to take over the lender.

“The financial institution had a well-defined and strong plan to proceed in operation and face up to further withdrawals,” Shay wrote. “Though I believed that the financial institution was in a powerful place to climate the storm, regulators evidently noticed issues otherwise.”

The grilling of prime executives from SVB and Signature will kick off a day of soul-searching in Washington over the explanations for the financial institution collapses, which shook confidence in US regional lenders and which the Fed has blamed for a credit score crunch.

Regulators, together with Fed vice-chair for supervision Michael Barr and FDIC chair Martin Gruenberg, will testify in regards to the collapsed banks in a separate listening to earlier than the Home Monetary Companies Committee.

In his opening remarks, Barr is about to inform lawmakers he’s “dedicated” to addressing “weaknesses in regulation and supervision” whereas being “delicate to how modifications could have an effect on banks within the present financial surroundings”.

Becker’s testimony additionally addressed criticism about his pay, together with disclosures that confirmed he bought $3.6mn in SVB shares shortly earlier than the financial institution collapsed. He stated he “believed very strongly” in SVB’s inventory and that his stake was almost 5 occasions bigger than the scale required by the board.

The sale of shares in February was triggered by SVB saying its outcomes for the fourth quarter, he stated. “I did nothing to speed up that commerce and solely discovered it had executed after the very fact.”

SVB’s market capitalisation hit a excessive of $44bn in 2021 on the peak of a pandemic-fuelled tech growth, however had dropped to about $17bn in February after considerations a couple of downturn within the enterprise capital trade that was its core shopper base.

Reporting by Antoine Gara, Stephen Gandel, Brooke Masters and Josh Franklin in New York, Colby Smith in Washington, and Tabby Kinder in San Francisco