SVB Financial says FDIC won’t return seized US$2 billion
SVB Financial Group, the bankrupt former parent of Silicon Valley Bank, said on Monday (Nov 6) that the US government had formally rejected its demand for a return of about US$1.93 billion that was seized by regulators after the bank’s collapse.
SVB Financial has been locked in a dispute with the US Federal Deposit Insurance Corporation (FDIC) since March, when the regulator cut off the company’s access to cash that it had held at the failed bank. SVB said in a Monday court filing in Manhattan that the FDIC had rejected its latest effort to recover the funds on Oct 20.
The collapse of the Santa Clara, California-based bank and Signature Bank, another US midsized lender, prompted a rout in banking stocks as investors worried about other ticking bombs in the banking system and led to UBS Group’s takeover of 167-year-old Credit Suisse Group.
To avert a broader crisis, the FDIC fully backstopped all deposits at SVB, even those over the US$250,000 guaranteed by law. SVB Financial said that its own accounts should have been included when the FDIC moved to protect “all” deposits at the bank.
SVB Financial said the FDIC initially allowed the company to retain access to its bank accounts, just like other bank customers, only to reverse course days later and push the company into bankruptcy on Mar 17.
SVB Financial sued the FDIC in US bankruptcy court in July to recover the funds, a move that the FDIC argued was an improper attempt to work around its normal process for evaluating bank insurance claims.
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SVB Financial said on Monday that it had now complied with the FDIC’s claim process, and that FDIC had denied its claim.
FDIC’s Oct 20 letter said that its public statements about protecting “all depositors” did not create an obligation to protect the bank’s owner as well. The denial letter said that SVB Financial had 60 days to appeal the decision in US federal court.
An FDIC spokesperson declined to comment. An SVB Financial spokesperson declined to comment.
SVB Financial has used its bankruptcy to sell assets, spinning off its investment banking unit in June and exploring potential sales of its venture capital and credit investment businesses. REUTERS
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