Silicon Valley Bank, a lender that has been a fixture in the venture capital space for decades, collapsed on Friday. The California Department of Financial Protection and Innovation closed SVB and named the FDIC as receiver. The trouble began on Wednesday after SVB suddenly announced plans to raise billions in capital to cover massive losses, sparking widespread panic among investors and the tech founders it backs. The company’s shares fell about 60% in Thursday trading, another 20% in market trading, and were flat at the open on Friday. Hours later, amid reports that SVB was struggling to attract buyers in the sale, the government took control. In the run-up to all this, SVB’s proxy statement, submitted earlier this month, said that the chief risk officer really stepped away from his role early last year, and the bank did not recruit a replacement until last January.
Laura Izurieta stepped down from her role as CRO of SVB Financial Group in April 2022, and officially left the company in October, according to SVB’s proxy filing. The bank appointed a permanent replacement as CRO, Kim Olson, in January of this year.
It is unclear how the bank manages risk in the interim period between the departure of one CRO and the appointment of another. Representatives at SVB did not return calls fortunerequest for comments.
Risk officers typically anticipate and manage regulatory, operational, competitive or other risks facing a company. SVB’s chief risk officer reports directly to the “Risk Committee,” which includes the chairman of SVB’s Board and all Board committees, in addition to the executive director, according to a filing from the company. The committee is responsible for hiring, evaluating and terminating CROs, and by 2023, there will be seven members.
Silicon Valley Bank does not have an official Chief Risk Officer during the difficult transition in the venture capital market – the industry SVB services closely. In early 2022, as interest rates begin to rise, venture capitalists pull back and slowly close deals, leaving tech companies backed with little capital to run their businesses. That directly affected the deposits in Silicon Valley Bank.
SVB is an important part of the tech world, which was rocked by mass layoffs last year. He said it had something to do with about 50% of America’s venture capital-backed companies, so it could have had an impact on the failure. A number of other financial institutions have already felt the tremors of SVB’s fall, and Signature Bank, prominent in the crypto world, saw its shares drop more than 30% while shares of First Republic, a regional bank, fell 23% during midday on Friday. Bill Ackman, founder of Pershing Square Capital Management, warned that SVB collapsed as well as other small institutions that are “too big to fail,” urging the government to consider bailing out.
Suddenly the rush for safety by investors was so severe that SVB moved from the market cap of more than $15 billion to foreclosure by the FDIC in a day.
The FDIC issued a statement that SVB customers will have access to insured deposits on March 13. But how customers will be able to recover uninsured deposits is still unclear.
Jessica Mathews contributed reporting