US investigating Goldman’s work for Silicon Valley Bank

NEW YORK – The US authorities are investigating the work Goldman Sachs did for Silicon Valley Bank (SVB) in the weeks before it failed, including its advice that the smaller lender sell a large portfolio of securities at a loss, according to a regulatory filing by Goldman on Thursday.

Goldman said it was “cooperating with and providing information to various governmental bodies in connection with their investigations and inquiries” into SVB,

which had collapsed suddenly on March 10,

touching off a crisis of confidence that led to the failure of two more regional lenders, and a panic in the stock market over the fate of others.

The investigations include “the firm’s business with SVB in or around March 2023, when SVB engaged the firm to assist with a proposed capital raise and SVB sold the firm a portfolio of securities”, Goldman’s filing to the Securities and Exchange Commission (SEC) said.

Investment bankers at Goldman advised SVB’s leaders to sell a US$21 billion (S$27.9 billion) portfolio of US government debt whose value had been greatly diminished by rising interest rates. SVB did so in a matter of hours, then revealed it had taken a US$1.8 billion loss on the move. Goldman also tried to arrange the sale of SVB’s stock.

SVB’s depositors withdrew billions of dollars in response to the news, a run that ended in its seizure by the Federal Deposit Insurance Corp (FDIC). Days later, another institution, Signature Bank, also collapsed, and regulators this week seized and sold First Republic Bank.

Since the crisis began, shares of a number of smaller banks have been hammered as investors try to bet on which might be the next to fall. The drop in share prices of companies like PacWest Bancorp and Western Alliance came even as the lenders tried to reassure investors that they are financially sound.

Goldman did not specify which regulators were conducting the investigation. In March, days after SVB’s collapse, a group of Democratic lawmakers in the House of Representatives sent a letter to the heads of the SEC, FDIC and Justice Department, asking them to investigate Goldman’s role as an adviser to the smaller bank. NYTIMES