Investigation launched into the collapse of the Silicon Valley bank: whether to wait for the collapse of the system

Financial turmoil in global markets continues

An investigation into the collapse of Silicon Valley Bank and its UK subsidiary has been launched in the US and UK. As financial markets struggle to recover from the turmoil of recent days, investigations have been launched into the bankruptcy of a California lender.

An investigation into the collapse of the Silicon Valley Bank (SVB) and its UK subsidiary was announced in the UK and America, although financial markets gradually calmed down and banking stocks recovered from Monday’s turmoil, writes The Guardian.

In the US, Justice Department prosecutors, as well as the stock market regulator, the Securities and Exchange Commission (SEC), are conducting separate investigations into the collapse of California lender SVB, which was handed over to the government after its deposits were reviewed.

The two investigations first reported by The Wall Street Journal are only preliminary and therefore may not result in any charges or allegations of misconduct. Such investigations are not uncommon when companies suddenly suffer large losses.

Authorities are also investigating a share sale by executives at parent company SVB Financial Group in the days before the bank went bankrupt, the report said.

Hours earlier, a group of SVB shareholders sued parent company SVB Financial Group and two of its top executives in what many expect to be the first of several likely lawsuits over the bank’s collapse.

The proposed class-action lawsuit accuses SVB Financial Group chief executive Greg Becker and chief financial officer Daniel Beck of covering up that raising interest rates would make the SVB unit “particularly susceptible” to bankruptcy.

U.S. regulators took emergency action Sunday night to prevent the effects of the SVB collapse from spreading by transferring ownership of the bank’s assets and liabilities to the Federal Deposit Insurance Corporation (FDIC), The Guardian recalls. The regulators have said they will ensure that all customers can access their money on Monday morning.

In the UK, politicians from the powerful Parliamentary Treasury Selection Committee have written to the Governor of the Bank of England and the Chancellor of the Exchequer for Economic Affairs, asking them about the collapse of the UK arm of the SVB and what it means for bank regulation after the financial crisis.

U.S. bank shares rebounded on Tuesday, reversing some of Monday’s heavy losses as markets swept over fears of an escalating banking crisis.

San Francisco-based regional bank First Republic jumped more than 50% on Tuesday, after falling 62% a day earlier. Shares of Western Alliance, headquartered in Phoenix, Arizona, jumped 40% on Tuesday. The S&P 500 rose almost 2% in New York at noon.

The increase came despite Moody’s downgrading its outlook on the US banking system to negative, citing a “rapidly deteriorating operating environment.”