The Biden administration has been adamant that the federal government’s sweeping emergency measures to shore up the banking system weren’t equivalent to a bailout.
(Bloomberg) — The Biden administration has been adamant that the federal government’s sweeping emergency measures to shore up the banking system weren’t equivalent to a bailout.
One contingent that likely received the message loud and clear: regional banking executives.
A smattering of leaders at regional banks across the US shed more than a quarter billion dollars in wealth in the span of days as fallout from Silicon Valley Bank’s collapse ricocheted through the sector.
The sharp decline, in stark contrast to the relief expressed by tech startups and venture capital funds who banked with SVB, underscores the message that while American depositors are safe, shares of the nation’s banks don’t appear to have any such backstop.
The $267 million plunge, sustained by top executives at 15 companies in the KBW Regional Banking Index whose shares were particularly hard-hit in Monday’s selloff, is just a slice of the wealth destruction that’s occurred since Wednesday. That was when fears over SVB’s flighty deposits and underwater bond portfolio intensified.
That figure excludes the losses of executives at SVB and Signature Bank, which was shuttered on Sunday. It also doesn’t factor in the plunging share price of First Republic Bank, whose chairman and founder, Jim Herbert, has ranked among the highest-paid executives in the US.
Read more: ‘Old-School’ Signature Bank’s Crypto Foray Ends in Swift Demise
Many banking executives hold tens of thousands of shares or more in their respective companies, since equity grants typically form a large portion of their compensation. The calculated losses reflect equity positions and exclude the value of options or restricted-stock units.
Big Decliners
Some of the biggest decliners in the selected group include the Kemper family of Kansas City-based UMB Financial Corp., whose stake fell by almost $100 million, and Harris Simmons, CEO of Zions Bancorp, whose net worth dropped by $25 million after shares of the Salt Lake City-based lender tumbled 36% since Wednesday.
A spokesperson for UMB declined to comment. Zions didn’t immediately respond to a request for comment.
Regional US bank stocks were poised to rally on Tuesday after falling for six straight sessions.
Bloomberg compiled the executives’ losses based on data in the most recent proxy filings. Any stock sales or purchases made since the proxy may not be reflected.
SVB Financial Group CEO Greg Becker, for one, sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure. Becker’s stake in SVB was valued at more than $20 million Wednesday before the bank imploded.
Hold Accountable
In an echo of the 2008 financial crisis, regional banking executives are facing the possibility of new regulations or legislation relating to their compensation.
Senator Elizabeth Warren called for Becker and the leader of Signature Bank to face clawbacks to their pay.
“Where needed, Congress should empower regulators to recover pay and bonuses,” Warren, a Massachusetts Democrat, wrote in a New York Times opinion piece.
Becker received $9.9 million in total compensation for the fiscal year ended Dec. 31, according to a SVB’s March 3 proxy statement. Signature Bank CEO Joseph DePaolo, who co-founded the company, received total compensation of $8.7 million in 2022. Last week before the bank failed, DePaolo’s stake had a gross value of $15.6 million, while Signature Chairman Scott Shay’s interest was worth about $50 million.
Representative Adam Schiff, a Democrat from California, said he was drafting a bill to hold executives at failed banks accountable.
“When banks fail, it’s working people who suffer the consequences,” he tweeted. “After 2008, we went for exec bonuses and compensation. We should do so again. This time we must succeed.”
–With assistance from Anders Melin.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.