The bank is on the brink of bankruptcy… ‘Mass disposal of stocks, bonuses and holidays’ by managers[Weekly world] : Seoul Economic Daily

Following the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank, even Credit Suisse (CS) faced a liquidity crisis, and financial instability is increasing. In the United States, government authorities and large banks have joined hands to support small and medium-sized banks in order to prevent a series of bankruptcies, but the irresponsible behavior of some executives is causing controversy. They sold their holdings on a large scale just before bankruptcy became official. US President Joe Biden expressed his willingness to strengthen the penalty, saying, “We must impose a heavier penalty on senior executives who caused bank insolvency through mismanagement.”

Foreign media, including the Wall Street Journal (WSJ), referred to government documents and reported that six high-ranking executives of First Republic Bank, a regional bank in the United States, had gradually sold their holdings before’ the crisis began. Executives sold 90,682 shares of the company between January 17 and March 6, for a total sale of 11.8 million dollars (about 15.4 billion won). Their average selling price is $130 per share, more than five times the closing price of $23.03 on the 17th (local time). James Herbert, who founded First Republic Bank, sold $4.5 million worth of stock during this period. Following this, the bank’s chief credit officer (CCO), chief executive officer (CEO), and president of private asset management also sold $7 million. Herbert’s side claimed that the stock was being sold to raise money for philanthropic activities and estate planning.

Greg Becker, the former chairman of SVB Bank, the first to go bankrupt due to a bank run and stock market crash, was also put on the chopping block for irresponsible actions. Former Chairman Becker sold 12,451 shares of parent company SVB Financial for about $3.6 million on the 27th of last month, 10 days before GMB went bankrupt. He was dismissed along with other executives after the official announcement of SVB’s bankruptcy on the 10th of this month. Three days after SMB’s bankruptcy, Becker and his wife, Marilyn Bautista, reportedly took a vacation trip to Maui, Hawaii. The Daily Mail, a daily newspaper in many countries, said, “The couple rode to the airport in a chauffeur-driven black limousine and took first class on the flight to Hawaii.” “The couple strolled leisurely along the streets of Lahaina, a coastal town on Maui’s northwest coast, far removed from the chaos that the collapse of the SVB has wreaked on financial markets around the world,” he added.

Under US securities law, banks are exempt from reporting insider stock transactions to the Securities and Exchange Commission (SEC). That is why the massive sell-off of stocks by senior bank executives driven by a liquidity crisis was not immediately noticed. Instead, banks report transactions to the Federal Deposit Insurance Corporation (FDIC), which makes them public on these websites, but that has fewer market repercussions than SEC filings.

The US Department of Justice and the SEC have launched separate investigations into SVB and Signature Banks. In this investigation, he is expected to focus on whether ‘moral hazard’ was announced during the bankruptcy process, such as the controversy surrounding the sale of executive stocks and the payment of bonuses to executives and employees. GMB is known to have paid annual bonuses to its employees after bankruptcy and up until the closure. Former Chairman Becker also gave an optimistic assessment just before bankruptcy, saying, “It’s a good time to start a business.” In a recent statement, President Biden targeted executives at SVB and Signature Banks, saying, “It should be easier for regulators to recover the pay of bank executives who have been bankrupted by mismanagement and excessive risk-taking, and ban them from working in the banking business again through civil penalties.” he said.