The U.S. Deposit Insurance Commission (FDIC) on Thursday sued 17 former executives and managers of Silicon Valley Bank (SVB), seeking billions of dollars in alleged gross negligence and breach of fiduciary duty that caused the bank’s March 2023 collapse, one of the world’s largest bankruptcies. in the USA.
In a lawsuit filed in federal court in San Francisco, the FDIC, acting as the bank’s receiver, said the defendants ignored basic standards of “prudent banking and the bank’s own risk policies, allowing the bank to take excessive risks to boost short-term profits and its stock prices.” .
The FDIC faulted the bank’s overreliance on long-term, interest-sensitive, unhedged government bonds such as U.S. Treasuries and mortgage-backed securities because it looked like rates would rise — and eventually did.
The commission also objected to paying a $294 million dividend to the parent company, which drew down needed capital “at a time of financial distress and management weakness” in December 2022, less than three months before the bank’s collapse.
“SVB represents a case of extremely poor management of interest rate and liquidity risk by the bank’s former employees and directors,” the lawsuit states.
Among the defendants are former CEO Gregori Becker, former Chief Financial Officer Danijel Beck, four other former CEOs and 11 former directors.
Becker’s attorney was traveling Thursday and could not comment, a bank spokesman said.
Lawyers for former chief risk officer Laura Izurieta called it “outrageous” to make her a defendant, saying she gave good advice on risk management before she resigned in April 2022, long before the bank’s collapse, Investor me reports.
“Their actions reflect outgoing FDIC leadership that has no interest in the truth,” Izurieta’s attorneys said.
The collapse of a Silicon Valley bank on March 10, 2023 and its seizure by the FDIC shocked financial markets.
That disrupted many tech startups whose deposits were held by the bank and upset many customers because an unusually large percentage of its deposits were uninsured.
The collapse foreshadowed the collapse of two more banks, Signature Bank and Prva Republika Bank, and raised fears of a repeat banking crisis like the one in 2008.
First Citizens BancShares, a North Carolina lender, bought SVB’s bank deposits and tens of billions of dollars in loans in a sale it arranged with the FDIC.
The Silicon Valley bank had about $209 billion in assets when it failed. Major US bank failures include Lehman Brothers in 2008, Washington Mutual including the bank unit in 2008, and First Republic in 2023.
