Silicon Valley Bank Chief Executive Greg Becker's cash bonus peaked at the time the company was making increasingly risky investments, a report by the Financial Times has found.
Becker's bonus was $3 million in 2021, according to the newspaper—more than double the amount he had received four years earlier. That was after the California lender had started betting big on risky assets exposed to rising interest rates.
The bank, which since its founding in 1983 had rapidly grown to become a tech-driven powerhouse, invested billions in long-dated U.S. government bonds, including mortgage-backed securities. It was able to do so thanks to the sudden flood of deposits that came in from its tech customers, as the sector—and especially the companies based in Silicon Valley—experienced a boom during the pandemic years.
In the same year, SVB had amassed a $125 billion securities portfolio which at the time likely didn't appear such a risky investment. But as the Federal Reserve hiked interest rates last year in an attempt to drive down rising inflation, the price of SVB's bonds fell and the bank's portfolio lost significant value. Last year, the portfolio lost $15 billion in value.
That, together with a growing number of struggling tech companies drawing on their deposits with the bank, quickly led to SVB's meltdown earlier this month.
But before they turned into failing bonds, the mortgage bonds the California lender had invested in were quite profitable for the bank, generating higher yields and thus bolstering earnings for SVB.
Becker's higher bonus was tied to multi-year bonus awards linked to the bank's return on equity (RoE), the FT writes after having had access to the bank's relevant filings. RoE is a measure of financial performance which estimates how efficient a company is at generating profit from money that investors have put into the business. SVB's profitability soared from 2017 to 2021 as a result of the risky investments in long-dated U.S. government bonds.
In 2021, Becker's pay was, in total, $10 million—almost 60 percent higher than in 2017. SVB's CEO wasn't the only one to see a jump in his bonus, and his pay, in 2021. Chief Financial Officer Daniel Beck earned a $1.4 million bonus in 2021, more than four times higher than the one he received when he joined the company in 2017. His total earnings that year were $3.8 million.
The two executives' bonuses dropped last year as the bank started losing profitability and its RoE fell by five percentage points. Becker reportedly received a $1.5 million cash bonus and almost $10 million in total earnings last year. Beck, on the other hand, received a $625,000 bonus and was paid overall $3.5 million.
Newsweek has emailed SVB's press team for comment, as Becker and Beck are no longer listed as executives on the bank's website.
The Federal Deposit Insurance Corporation earlier this month transferred all deposits held by SVB into a newly-created "bridge bank" and appointed Tim Mayopoulos to run it.
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Giulia Carbonaro is a Newsweek Reporter based in London, U.K. Her focus is on U.S. and European politics, global affairs ... Read more
