When Silicon Valley Bank imploded last week, most of its 8,500 staff were still working remotely. “Some people worked from Miami, some moved to Las Vegas or a cabin in the woods and did the digital nomad thing,” said one former banker.
SVB’s total embrace of remote working was just one way in which the technology-focused lender diverged from its peers — a top-20 US bank with a culture that more closely resembled the Silicon Valley start-ups it served.
Long after Wall Street ordered its bankers back to the office, the California-based lender’s chief executive, Greg Becker, at times worked from Hawaii, president Mike Descheneaux decamped to Florida, chief risk officer Laura Izurieta was based in a suburb of Washington and general counsel Mike Zuckert worked mostly from New York, according to several people close to the bank.
Last month, the bank acknowledged in its annual report that it “may experience negative effects of a prolonged work-from-home arrangement”. Yet SVB was prepared to take on extra risks to promote a culture that prized “empathy” for customers and staff, and at times prioritised innovation and growth at the expense of risk management, according to interviews with current and former workers.
“This is a west coast bank that operates at the heart of innovation and is . . . empathetic and dependent on relationships,” said a former executive. “It is not cut-throat like Goldman Sachs.”
Now, SVB’s governance, strategy and culture are in the spotlight as regulators examine what led to the largest US banking collapse since the 2008 financial crisis.
At the centre of SVB’s demise is a decision by management at the height of the pandemic — when a tech investment boom meant it was flooded with new deposits — to lock up half of its assets in a $91bn portfolio of securities that made it vulnerable to rising interest rates.
At the time, its share price valued it at a record $44bn, more closely resembling a surging tech company rather than a regional bank stock. However, the success made it complacent to the risks, insiders told the Financial Times.
SVB made the fatal decision in 2021 to make a bigger-than-average bet on long-dated securities at the same time it embraced a working structure that meant its executives were scattered across the US, even while aggressively pursuing an expansion to become a full-service bank.
“It is harder to have a challenging call over Zoom. It makes it harder to challenge management,” said Nicholas Bloom, a professor at Stanford University who has studied remote working extensively. “Ideas like hedging interest rate risk often come up over lunch or in small meetings.”
To become the largest bank to the “innovation economy”, serving half of all venture-backed tech and life sciences companies in the US, SVB ventured where most other banks would not. It lent money to unprofitable start-ups and helped entrepreneurs with household finances such as large mortgages, car payments and school fees.
“SVB knew how to understand a business that wouldn’t make money for three to five years,” said a former SVB executive. “These are companies that require a very different type of bank.”
It became deeply enmeshed in the venture community, entertaining entrepreneurs and venture capitalists at ski trips, baseball games and private boxes at concerts. It lent billions of dollars to wineries and vineyards where it could network with clients and send wine to its customers’ parties.
“Part of it is about client service, but part of it is sending a signal to their clients about who SVB is,” said an executive at a top venture capital firm.
In exchange for the risks it took, SVB in many cases required borrowers to bank with it exclusively and took equity warrants — the right to purchase a percentage of its shares in the future — in their company. It mirrored the spirit of a venture firm: betting that a few companies it lent to would be so successful the gain would offset losses from all of those that failed.
However, insiders complained as the bank grew at breakneck speed, its top management became inordinately focused on social issues and overly reliant on the use of expensive consultants to explore new strategies, when they should have prioritised management of the bank’s expansion and properly hedging against its interest rate risk.
“It felt like a lot of decision makers were relying on consultants in order to make decisions,” said a former executive, citing SVB’s relationships with consulting giants such as McKinsey. “It felt like a lot of overengineering to get to [answers] that people ought to have figured out on their own.”
SVB executives were also deeply committed to social justice, according to several of its ex-employees. “I almost felt like I was at work on a college campus,” said another former executive, who recalled weekly internal “TED talks” on social issues and classes on “how to make sure you were not committing a microaggression”.
“It was not the abrasive, roll-up-your-sleeves culture of Wall Street . . . Working at SVB felt more like working at a tech company than it did like working at a bank,” said one former banker.
SVB was also battling internal conflicts as a result of its rapid expansion. The bank had been on a blistering growth trajectory in recent years, almost tripling headcount between 2020 and 2023 through a series of acquisitions, including investment bank Leerink Partners, private bank Boston Private and equity research group MoffettNathanson.
It went on a hiring binge, poaching bankers from companies such as Credit Suisse by offering lucrative guarantees, often essentially locking in a 50 per cent increase in pay, said people briefed on the matter.
The expansion into full-service banking was aimed at increasing SVB’s competitive advantage as larger institutions such as JPMorgan muscled into its territory of providing financing to tech start-ups and started poaching its bankers.
“It was well-designed from a strategy point of view,” said one former executive. “But it was still under construction.”
Integrating the businesses and pushing into new lines of work such as underwriting tech listings while the bank was working almost entirely remotely caused problems, according to people involved in the acquisitions.
After spending nearly $1bn to acquire Boston Private, the unit suffered a rush of departures shortly after the deal closed. Fully remote working was a “tough way to join the culture of a place”, said one ex-Boston Private executive. “I got the sense that it was as decentralised a command structure as it could possibly be.”
SVB, through its receiver the Federal Deposit Insurance Corporation, declined to comment.
SVB set the standard for supporting thousands of young companies through tough times, and its collapse leaves a gaping hole in the tech start-up ecosystem. But its success in dominating the niche start-up banking industry meant it was overexposed when investors retreated from tech groups, and its executives had not fully contemplated the risks it faced.
“Things had been so good at the bank for so long that there was an unseriousness to it,” one former SVB executive said.
A second ex-executive in SVB’s senior finance function added: “There was an overemphasis on things that weren’t important and not enough on things that are.”
Additional reporting by Joshua Franklin and George Hammond
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