US Justice Department launches probe into collapse of Silicon Valley Bank: Report

A Wall Street Journal report says that US prosecutors have opened an investigation into the collapse of Silicon Valley Bank. The US Justice Department is reportedly probing the sudden fall of the bank, leading to ripples in markets across the world. The bank was shuttered on Friday following a bank run. Meanwhile, the Securities and Exchange Commission has also launched a parallel investigation.

As part of the probe, officials are looking into stock sales by officers of SVB Financial Group, which owned the bank, WSJ reported. SEC Chair Gary Gensler had earlier said that the focus of the agency is on monitoring for market stability and identifying and prosecuting any form of misconduct that might threaten investors during periods of volatility.

As the Silicon Valley Bank collapsed, followed by the Signature Bank, regulators find themselves scrambling to contain the damage so that it does not affect the rest of the sector.

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Meanwhile, on Tuesday ratings agency Moody's cut its outlook on the US banking system to "negative" from "stable."

Earlier this week, SVB Financial Group and two other executives were sued by shareholders. They accused them of concealing how rising interest rates would leave its Silicon Valley Bank unit susceptible to a bank run.

Fedconsiders tougher rules for midsize banks

Reuters has reported that the Federal Reserve is considering tougher rules and oversight for midsize banks following SVB's collapse. A review of the $209 billion bank's failure is being conducted by Fed Vice Chair for Supervision Michael Barr. It is expected that the review could lead to strengthened rules on banks in the $100 billion to $250 billion range.

The review will be released by May 1, and will be in addition to a review of bank capital rules by Barr which is already underway.

The Wall Street Journal regarding midsize banksis likely to leadto more stringent capital and liquidity requirements and potentially beefed up annual "stress tests."

New SVB CEO urges clients to move deposits back

Meanwhile,Silicon Valley Bank's new Chief Executive Tim Mayopoulos has urged top venture capital clients of the bank to move their deposits to its newly created bridge entity. The development followed a virtual meeting. The former Fannie Mae CEO was appointed to headSilicon Valley Bridge Bank NA bythe Federal Deposit Insurance Corporation (FDIC).

Mayopoulos also assured clients at the meeting that deposits at the bank were now as safe as they would be in any USbank or institution.

Consumers reach out to other banks

Following the collapse of SVB, consumers have flooded banking giants, including JPMorgan Chase & Co,Bank of America Corpand Citigroup Inc. The transfers have reached billions of dollarsas investors are worried about the financial health of smaller regional lenders.

However, thelenders are careful not to solicit customers from other banks due to concerns that they could accelerate the outflows.

(With inputs from agencies)

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