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Our top story today is on Silicon Valley Bank. Chief executive Greg Becker and chief financial officer Daniel Beck saw their pay soar after the bank embarked on a strategy to boost profitability by buying riskier assets exposed to rising interest rates, according to a Financial Times analysis of securities filings and people familiar with the matter.
The jump in their pay was a result of large multiyear bonus awards pegged to the bank’s return on equity, a key measure of profitability that rose sharply between 2017 and 2021, the filings show.
Becker’s cash bonus peaked at $3mn in 2021, more than double the amount he received four years earlier. Beck earned a $1.4mn bonus in 2021, more than four times the amount he received in 2017 after joining the company.
Current and former SVB executives told the FT that the bank boosted returns by buying long-term paper, especially mortgage bonds, that bolstered earnings because they generated higher yields. The strategy backfired when interest rates rose sharply and depressed the value of the bonds.
Our top commentaries for today on banks in turmoil:
Speaking of inflation, we have an analysis of the Bank of England’s decision to raise interest rates for the 11th consecutive time yesterday after unexpectedly high February inflation data. Investors and economists are split on whether borrowing costs will continue to increase into the summer.
Here’s what else I’m keeping tabs on today:
Economic data: S&P Global publishes flash manufacturing and services purchasing managers’ indices for the EU, UK, US, France and Germany.
Netanyahu in London: The Israeli prime minister meets his UK counterpart while protests continue at home over controversial judicial reforms.
Results: British pub chain JD Wetherspoon, clean-energy company Ceres Power and engineering group Smiths report.
UK politics: The Conservative party holds its two-day spring forum in Birmingham with the general election due next year top of the agenda.
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1. TikTok’s chief faced hostile US lawmakers as he tried to fight a potential ban yesterday during testimony to Congress. Shou Zi Chew told House representatives the viral-video app would be kept “free from any manipulation by any government”. We have more details from the tense congressional hearing.
2. EXCLUSIVE: Gibraltar is stuck in limbo as the UK and Spain are at odds over who should check passports for passengers arriving there. After more than a year of gruelling post-Brexit talks, here’s why the issue has huge implications for the British territory’s economy.
3. EXCLUSIVE: China has released a top chip investor after an eight-month detention as the country battles Washington’s containment efforts. Chen Datong’s $1.5bn Hua Capital was at the forefront of Beijing’s efforts to jump-start domestic chip production.
4. UK consumer confidence improved in March on the back of better economic forecasts, but people’s outlook on their own finances worsened, according to data published today. Here are the findings from research group GfK.
5. EXCLUSIVE: Carl Icahn has alleged Illumina directors demanded extra personal liability insurance from the company before they agreed to close its $8bn purchase of cancer screening company Grail against the wishes of regulators. Read more on the activist investor’s proxy battle with the world’s biggest genome-sequencing company.
How well did you keep up with the news this week? Take our quiz.
It took just 72 hours for Swiss regulators to fast-track a $3.25bn rescue of Credit Suisse by UBS. Now the banks face painful years ahead as they integrate the businesses. Insiders say the biggest fear within UBS is how to protect its carefully restored values from what one senior figure at the bank described as a “rancid” culture in parts of its defunct rival.
Conservatives are winning some of today’s culture battles, but they are losing the bigger war, writes the FT’s chief data reporter John Burn-Murdoch. Exploiting “wedge issues” such as immigration and LGBT rights has cost the right its next generation of voters.
As shares of Credit Suisse hover under $1, the price of its memorabilia is on the rise. When the storied Swiss bank ceased to exist practically overnight, baseball caps, ski hats and other items bearing its logos were posted on auction sites and racked up bids, as collectors tried to grab pieces of fashion — and financial — history.
Additional contributions by Gordon Smith and Emily Goldberg
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