SVB boss’ pay trebled to $10m in just four years before bank’s collapse

Bonuses paid to bosses at Silicon Valley Bank increased by millions of dollars as they embarked on a series of risky investments that ultimately contributed to the bank’s collapse.

Chief executive Greg Becker’s cash bonus reached a high of $3 million in 2021 – more than double what he received in 2017 – making his total pay packet $10 million.

The cash bonus paid to Daniel Beck, SVB’s chief financial officer, in 2021 was $1.4 million, quadruple what he got four years earlier.

The executives received the generous rewards after they oversaw an impressive rise on the bank’s return on equity, a benchmark of how profitable an institution is. These results were thanks to investments in bonds that enjoyed high yields between 2017 and 2021.

But the value of the bonds plunged last year as the Federal Reserve hiked interest rates to tackle out-of-control inflation. The bank collapsed earlier this year after it was unable cover a rush of customer withdrawals – partly because it had used their cash to buy bonds whose value had plummeted.

Silicon Valley Chief executive Greg Becker’s cash bonus reached a high of $3 million in 2021, while Daniel Beck, SVB’s chief financial officer, got $1.4 million

DailyMail.com spotted Silicon Valley Bank’s failed CEO Gregory Becker in Maui after being fired amid the collapse of the bank. Becker, 55, put the chaos behind him and was seen walking the streets of Lahaina in shorts, a t-shirt and flip flops

The revelations about soaring bonuses for Becker and Beck follows other disclosures about the bank dishing out loans worth hundreds of millions of dollars to officers, directors and shareholders in the months before it collapsed.

Beck was pictured earlier this month laying low at his luxurious $3.1 million Hawaiian hideaway days after being fired. 

The bonuses, reported by the Financial Times, mean Becker was paid a total of $10 million in 2021, nearly 60 percent more than in 2017. Beck netted a total of $3.8 million, about double what he’d earned four years previously.

In 2022, as SVB was reaching breaking point, Becker took a $1.5 million cash bonus and was paid nearly $10 million in total. Beck’s bonus was $625,000 and he earned $3.5 million overall.

The company’s return on equity increased as the average duration of its securities portfolio increased. In 2016, before Beck was made CFO, the average duration was 2.5 years – but that increased to 3.8 years by the end of 2018.

Duration is a measure of how sensitive a bond is to interest rate rises and the higher the figure, the more a bond’s value is likely to fall as rates rise. 

The incentive for executives to take risky bets is highlighted by the fact Becker was eligible for a cash bonus equal to 100 percent of his base pay in 2017. By 2022, he could earn a bonus equivalent to double his base pay if the bank hit targets. 

SVB’s customer deposits surged dramatically through 2021 while the tech sector – which the bank catered for – was awash with cash.

Beck told a first quarter earnings call in 2021: ‘We’ve seen just incredible liquidity growth coming through the end of last year and continuing through the quarter.’

Referring to the investment in bonds, he added: ‘We are comfortable being able to put some of that money to work in longer duration [investments]’.

Revelations about executives’ bonuses come after it emerged the bank’s loans to insiders surged in the months before its collapse

SVB’s collapse was the second largest bank failure in US history following the demise of Washington Mutual in 2008

A former executive said the ‘risk’ came amid ‘pressure to generate income on the new money’.

But as inflation spiraled in 2022 and the economic climate for tech firms darkened, many customers wanted to withdraw their money. SVB couldn’t pay out and was forced to sell some of its bonds at a $1.8 billion loss to cover the run on the bank.

The Federal Deposit Insurance Corporation took control of the bank on March 10 – triggering a crisis of confidence in the banking sector as a whole.

San Francisco Federal Reserve boss Mary Daly has felt the wrath of both Democrats and Republicans for her failure to act on signs of weakness at the bank.

DailyMail.com reported earlier this week that Silicon Valley Bank dished out $219 million worth of loans to officers, directors and principal shareholders in the months before it collapsed.

The money was handed it out in the final quarter of 2022 and was three times higher than the amount borrowed by insiders in the three months before, marking a two-decade record high.