Fed's Barr calls Silicon Valley Bank failure a 'textbook case of mismanagement'
Federal Reserve Chairman Jerome H. Barr has called the recent bankruptcy of Silicon Valley Bank a “textbook case of mismanagement.”
According to reports, the San Francisco-based bank, which had been operational since 1983, filed for bankruptcy on March 24th. It had been struggling with a long-term debt burden that had reached nearly $4 billion.
The bank had become a major player in the tech industry, providing loans to numerous start-ups. It also made a name for itself in the venture capital space, having invested in several high-profile tech companies, such as Twitter and Uber.
However, in recent years, the bank had been facing increasing pressure from regulators, who had been concerned with the bank’s risk management practices. The bank had also been the target of several lawsuits, including one over its alleged involvement in a pyramid scheme.
In a statement, Barr said that the bank’s failure was “the result of a long-term mismanagement of its finances, a failure to adhere to prudent banking practices and a failure to adjust to changing economic conditions.”
He went on to say that the bank’s failure was an example of why it was important for banks to adhere to regulatory standards and to remain vigilant when it came to managing their financial risks.
The bank’s failure will likely have an impact on the tech industry, as it had been a major lender to start-ups. It remains to be seen how the bankruptcy will affect Silicon Valley’s venture capital market.
The Federal Reserve is currently investigating the bank’s failure, and is expected to release a report on its findings in the near future.