The real reason Silicon Valley Bank failed: working from home?
Since the advent of the 'new normal', banks have been pretty steadfast in their approach to working from home. They want their employees centralised and in the office. Looking at what's happened with Silicon Valley Bank (SVB) this past week, they might feel vindicated.
The de-facto bank of the tech sector, SVB - like many of the tech companies it worked with - was very open to remote work in the US, with work from home available "most of the time". It had a plethora of experienced banking talent located a great distance apart from each other.
Take risk, for example. Former Morgan Stanley executive director Doug Carter worked remotely, based out of Parisppany, NJ, as the director of business risk. Director of financial risk management Josiah Snelgrove was based in Raleigh, NC, 150 miles from the Charlotte office.
Recent hires like senior payments strategist Akua Pokua-Nuako, who joined from the fintech Toast in January, were recruited for remote positions.
In New York, senior officials seem split between remote and hybrid. Head of model risk management Nav Vaidhyanathan worked purely remotely while managing director Thomas Borruso, who spent eight years at JPMorgan, worked for SVB on a hybrid basis.
The situation seems to have been somewhat different at SVB's investment banking subsidiary, SVB Securities. There, it seems staff were expected in the office a lot more frequently.
Needless to say, WFH wasn't the only issue at SVB. The real problem stemmed from the fact that the bank had no duration hedges on its bond investments and that a new financial team decided to start investing in long duration bonds circa 2017, without any real risk management measures. Work from home may have contributed to communications breakdowns, but a bigger issue is likely to have been the absence of a chief risk officer from April 2022 to January 2023. Kim Olsen joined SVB from Sumitomo in this role in January 2023. She appears to have been based in the New York office.
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