BlackRock, the world's largest asset management firm, had already warned Silicon Valley Bank (SVB) that it had risk controls "substantially below" other lenders.
In January 2022, the investment management company delivered a risk control assessment in which it rated SVB with a "C" and even advised the bank that its ratings were lower than other similar banks in 11 of the 11 factors considered.
According to information shared by the Financial Times, auditors discovered that Silicon Valley Bank was not making updates on its portfolio in real time. In fact, they noticed that it was not even done on a weekly basis.
The experts also analyzed the response of SVB's equity portfolios and other potential investments within various factors such as: rising interest rates, broader macro economic conditions and how this would affect the bank's capital and liquidity.
The review looked at several scenarios and then presented the report to the bank's senior management. However, according to the aforementioned media outlet, a BlackRock executive noted that SVB did not listen and even declined the offer to do follow-up work.
Silicon Valley Bank was warned by BlackRock that risk controls were weak https://t.co/TNmbtgZVm7
— Financial Times (@FinancialTimes) March 18, 2023
BlackRock warns of the beginning of a possible "crisis"
Now, the CEO of the investment management company, Larry Fink predicts that the collapse of Silicon Valley Bank could be the beginning of a "slow rolling crisis" in the financial system that would include "more seizures and closures."
Ray Dalio, the recently retired founder of Bridgewater, also felt that SVB's bankruptcy could have major repercussions.
"This bank failure is a ‘canary in the coalmine’ early-sign dynamic that will have knock-on effects in the venture world and well beyond it," he said.
Despite this, President Joe Biden recently stated that the banking system is safe and that Americans can remain confident that their deposits will be "there when you need them."
