Silicon Valley Bank tripled loans to insiders in months before its collapse

A sign for a Silicon Valley Bank private branch is displayed in San Francisco, Tuesday, March 14, 2023. The recent failure of the Silicon Valley Bank was unlike a traditional bank run. It involved Twitter, internet memes and message boards and happened at unprecedented speed. (AP Photo/Jeff Chiu)

Silicon Valley Bank more than tripled its lending to bank insiders at the end of 2022, just months before its collapse.

Loans to officers, directors, principal shareholders and related interests jumped from $66 million in the third quarter of 2022 to $219 million in the fourth quarter, according to data on insider loans that banks are required to report to the federal government.

The jump in loans to bank insiders came as the Federal Reserve noticed problems with how Silicon Valley Bank was tracking interest rate risks, or how exposed the bank was to changes in interest rates, Bloomberg reported. 

It is a record dollar amount of loans issued to insiders, going back at least two decades, according to Bloomberg.

The Federal Reserve’s interest rate hikes over the last year, part of an effort to rein in soaring inflation, appear to have contributed to Silicon Valley Bank’s demise earlier this month. 

The bank had invested heavily in longer-term mortgage-backed securities when interest rates were low during the pandemic.

However, as interest rates rose, Silicon Valley Bank’s investments lost about $15 billion.

Officials on Wednesday hiked interest rates again by 0.25 percentage points after the numerous failures in the banking sector prompted some analysts on Wall Street to call for a pause.

Tags federal reserve interest rate hikes Silicon Valley Bank Silicon Valley Bank collapse SVB

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