Silicon Valley Bank’s risk model flashed red. So its executives changed it.

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Silicon Valley Bank’s risk model flashed red. So its executives changed it.
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Focused on profits, leaders made decisions that foreshadowed the bank’s surprise failure

Instead of heeding that warning — and over the concerns of some staffers — SVB executives simply changed the model’s assumptions, according to the former employees and securities filings. The tweaks, which have not been previously reported, initially predicted that rising interest rates would have minimal impact.The new assumptions validated SVB’s profit-driven strategy, but they were profoundly misplaced.

The episode shows that executives knew early on that higher interest rates could jeopardize the bank’s future earnings. Instead of shifting course to mitigate that risk, they doubled down on a strategy to deliver near-term profits, displaying an appetite for risk that set the stage for SVB’s stunning meltdown.

Efforts to contact Beck were unsuccessful, and lawyers representing him in a lawsuit didn’t respond to requests for comment. Efforts to contact Michael Kruse, who headed the bank’s Asset Liability Management Committee, according to the former employees, were also unsuccessful. Michael Barr, the Fed’s vice chair for supervision, testified to a Senate committee Tuesday that its supervisory team cited the bank for “ineffective board oversight” and “risk management weaknesses” in May.SVB was a financial pillar of Silicon Valley

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