Item 1 of 2 SVB (Silicon Valley Bank) logo and decreasing stock graph are seen in this illustration taken March 19, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
[1/2]SVB (Silicon Valley Bank) logo and decreasing stock graph are seen in this illustration taken March 19, 2023. REUTERS/Dado Ruvic/Illustration/File Photo Purchase Licensing Rights, opens new tab
- FDIC seeks billions of dollars in damages
- Officials faulted for ‘egregious mismanagement’
- Bank’s demise sparked fears of banking crisis
Jan 16 (Reuters) – The FDIC on Thursday sued 17 former executives and directors of Silicon Valley Bank, seeking to recover billions of dollars for alleged gross negligence and breaches of fiduciary duty that caused the bank’s March 2023 collapse, one of the largest U.S. banking failures.
In a complaint filed in San Francisco federal court, the FDIC, in its capacity the bank’s receiver, said the defendants ignored fundamental standards of prudent banking and the bank’s own risk policies in letting the bank take on excessive risks to boost short-term profit and its stock price.
The FDIC faulted the bank’s overreliance on unhedged, interest rate-sensitive long-term government bonds such as U.S. Treasuries and mortgage-backed securities, as rates looked set to – and eventually did – rise.
It also objected to the payment of a “grossly imprudent” $294 million dividend to its parent that drained needed capital “at a time of financial distress and management weakness” in Dec. 2022, less than three months before its demise.
“SVB represents a case of egregious mismanagement of interest-rate and liquidity risks by the bank’s former officers
