US authorities investigate Goldman Sachs’ role in Silicon Valley Bank collapse
US authorities have launched an investigation into Goldman Sachs‘ work with Silicon Valley Bank (SVB) in relation to the events that led to the collapse of the California-based bank. Goldman disclosed the probe in a recent securities filing, noting that they are cooperating and providing information to various government bodies. The investigation focuses on the bank’s activities for SVB in March, just before the tech-focused bank’s demise.
Goldman Sachs has faced criticism over its dual roles with SVB, in which it advised SVB and purchased distressed debt in a deal that played a crucial part in the bank’s collapse. Federal banking regulators seized SVB on March 10 following a run on deposits. The bank reported two days earlier that it had lost US$1.8 billion from the sale of US$21 billion in securities.
On the same day of the press release, SVB announced that it had enlisted Goldman Sachs to assist with a planned capital raise. The disclosure of the trading losses led to the market interpreting the situation as a sign of SVB’s desperation to raise cash to meet liquidity needs, ultimately resulting in the bank’s downfall.
In the recent securities filing, Goldman Sachs revealed that the government probes cover “when SVB engaged the firm to assist with a proposed capital raise and SVB sold the firm a portfolio of securities.” This follows a request from 20 House Democrats to US regulators, calling for an investigation into whether Goldman Sachs “operated at ‘arm’s length’ in their role as advisor for SVB.” The outcome of this investigation remains to be seen, with potential consequences not only for Goldman Sachs but also for the broader financial industry if any wrongdoing is discovered, reports Channel News Asia.
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