The role of Goldman Sachs in final days of Silicon Valley Bank


A $1.8 billion loss from a securities sale kicked off market panic about California lender Silicon Valley Bank last week. On Tuesday its parent company disclosed which financial giant purchased those securities: Goldman Sachs (GS).

The new disclosure made in a filing from SVB Financial (SIVB) reinforces the central role that one of Wall Street’s best-known firms played in the final days of the nation’s 16th-largest bank.

Goldman Sachs, according to an earlier filing, was also the banker tapped to attempt a $2.25 billion capital raise last week for Silicon Valley Bank as the lender wrestled with an outflow of deposits. The capital raise was ultimately unsuccessful, setting the stage for the bank’s seizure by regulators on Friday.

SVB Financial first disclosed its $1.8 billion loss on March 8, saying that it had “completed the sale of substantially all of its available for sale securities portfolio” for $21 billion. But it didn’t disclose the seller.

Lights are on at the world headquarters of Goldman Sachs in New York on Tuesday, Jan. 24, 2023. The storied investment bank has recently signaled a partial retreat from its efforts to build up a consumer banking business. The World Trade Center is at right. (AP Photo/Peter Morgan)

On Tuesday it said in a new federal filing that Silicon Valley Bank received approximately $21.45 billion for a portfolio of available for sale securities with a book value of approximately $23.97 billion, and that it was sold to Goldman “at negotiated prices.” That sale provided the bank with some liquidity but it also created a $1.8 billion after-tax loss for the bank.

Goldman declined to comment. SVB didn’t have an immediate comment.

It is not uncommon for Goldman Sachs, one of the most powerful firms on Wall Street, to provide multiple forms of assistance to clients as it did in the case of Silicon Valley Bank. A person familiar with the matter told Yahoo Finance that Goldman purchased a portfolio of “highly liquid” securities from SVB “at arm’s length and on market terms.”

This person said Goldman was not an adviser on the portfolio sale but that SVB sought Goldman’s help in its final days to find liquidity. The securities sale to Goldman was one attempted solution, this person said.

Goldman has trading and investment banking as well as asset and wealth management operations. It also has a bank that as of Dec. 31 was the eighth-largest in the US, according to Federal Reserve data, with $487 billion in assets. It launched its consumer-banking arm in 2016, and recently said a part of that business had lost $3 billion since 2020.

After Silicon Valley Bank’s seizure, Goldman was also involved in the trading of around $700 million in bonds held by SVB Financial, according to a Tuesday report in The Wall Street Journal. It facilitated the trades to distressed-debt investors over the weekend, the Journal reported.

The fall of Silicon Valley Bank kicked off a tumultuous week for the banking industry, with regulators agreeing over the weekend to protect all depositors at that California bank and failed New York lender Signature Bank while also establishing a lending program so that other banks could get financing in exchange for their assets.

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