André Esteves: intern would have seen the risk of SVB – 03/28/2023 – Market

Chairman of the board of directors of BTG Pactual, André Esteves harshly criticized the administration of SVB (Silicon Valley Bank), which went bankrupt at the beginning of the month after being hit hard by the process of raising interest rates promoted by the Fed (Federal Reserve, bank central US).

According to a Bloomberg report, the banker said, during a BTG Pactual event in Chile, that “any junior analyst” or “intern” at a bank in Latin America, more accustomed to market volatility, would have been able to identify the risk of an increase of interest to the balance sheet of the business.

Esteves said that the environment of extremely low interest rates in recent years in developed markets meant that many people were not prepared to deal with a new scenario of increased volatility due to the process of monetary tightening conducted by central banks.

“It’s a very basic asset and liability management that any junior analyst working in a bank in Chile, Brazil or Colombia or any other country that presents a little more volatility would know,” said Esteves, according to the publication.

He further stated that SVB’s bankruptcy was due to “gross mismanagement” and that “any intern at BTG or Banco de Chile or any other big Chilean bank learned in the first three months on the job that you shouldn’t do this — but apparently they haven’t.”

Aimed at the startup ecosystem, SVB found itself in a delicate position in the environment of rising interest rates in the United States in recent months, when a number of technology companies that are customers of the bank saw the faucet turn off and rushed to withdraw funds deposited in the bank.

With part of the deposits allocated in long-term US government bonds that suffered devaluation in the wake of the Fed’s interest rate hike, the SVB was unable to honor its commitments to customers. Due to the serious financial situation it was in, the bank was taken over by the US government.

In the wake of the SVB case, other US banks also showed weaknesses, such as Signature Bank and First Republic, increasing caution among investors about the solidity of the banking system in the region.