SVB Financial Group and the federal regulator that closed its Silicon Valley Bank (SVB) unit indicated at a bankruptcy court hearing on Tuesday (Mar 21) that a fight is looming over US$2 billion of the former parent company’s cash that was seized along with the lender.

SVB Financial, which filed for bankruptcy on Friday, had said in court papers the US Federal Deposit Insurance Corporation (FDIC) took “improper actions” to cut off the parent company from its cash held at its former subsidiary, which was seized by regulators to stem a national bank run.

SVB Financial’s attorney told US bankruptcy judge Martin Glenn at a hearing in Manhattan that the financial company lost access to its deposits the day before it filed for Chapter 11 protection.

“Not only has the bank been taken, all the cash has been taken,” said James Bromley, an attorney for SVB Financial.

California banking regulators on Mar 10 closed Silicon Valley Bank in the largest US bank failure since the 2008 financial crisis.

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 wider crisis.

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Kurt Gwynne, an attorney for the FDIC as receiver for Silicon Valley Bank, disputed at Tuesday’s hearing that regulators had done anything improper. He also said there may be fights over the money SBF Financial had on deposit at the bank.

“There was nothing wrong with freezing accounts and trying to protect deposits” before the bankruptcy filing, Gwynne said.

Marshall Huebner, an attorney representing creditors who hold more than half of SVB Financial’s bond debt, said in court that the FDIC should not be allowed hold the parent company’s deposits indefinitely while creditors are owed US$3.4 billion.

Gwynne said that the FDIC and other regulators took steps to insure all bank deposits as a way of preventing a banking panic and without those steps, there would be nothing of value at SVB Financial to fight over.

He also said that SVB Financial was not just a depositor, but also a shareholder of the bank and shareholders were not being protected by regulators.

Glenn said he did not believe at this time that the FDIC acted improperly.

Bromley said there were bidders for SVB Financial’s businesses, which include venture capital and investment banking units. Those units were excluded from the FDIC takeover.

While SVB Financial lost access to around US$2 billion, it still has access to over US$180 million in accounts at other banks. Glenn said he was prepared to allow SVB Financial to use up to US$100 million for investment activity.

The FDIC has said in court filings that it is holding SVB Financial’s funds while investigating potential claims against it.

SVB Financial and two top executives were sued last week by shareholders who accused them of concealing how rising interest rates would leave the Silicon Valley Bank unit “particularly susceptible” to a bank run.

SVB Financial has US$3.4 billion in debt and it manages about US$9.5 billion of other investors’ money across its portfolio of venture capital and credit funds, according to court filings.

Silicon Valley Bank was SVB Financial’s largest asset, accounting for more than US$15.5 billion of SVB Financial’s US$19.7 billion in total assets. REUTERS