California tech lender Silicon Valley Bank’s (SVB) parent company sued the Federal Deposit Insurance Corporation (FDIC) on Sunday for nearly $2 billion months after the regulator bailed out depositors at its main company, according to a bankruptcy court filing.
SVB Financial Group (SVBFG) filed for bankruptcy in March, just days after its main business SVB collapsed and its depositors received a substantial bailout from the FDIC’s taxpayer-backed Deposit Insurance Fund (DIF). SVBFG alleges the FDIC violated U.S. bankruptcy law by retaining almost $2 billion of its cash following the regulator’s takeover of SVB in March, according to the filing.
The FDIC estimated SVB’s failure depleted the DIF by $16 billion and that, as the regulator assesses the portion of the cost SVBFG should pay for the rescue, it has legal authority to keep the seized $1.93 billion, according to Reuters.
“These continuing violations are having a significant impact on the Debtor,” SVBG wrote in the filing. “The $1.93 billion in Account Funds is the core estate asset. The Debtor’s lack of access to these Account Funds is impeding its ability to reorganize, and causing harm to the Debtor on a continuous basis.” (RELATED: Federal Reserve Says It Dropped The Ball In Silicon Valley Bank Failure)
WASHINGTON, DC – MAY 17: Former CEO of Silicon Valley Bank Greg Becker testifies during a House Financial Services Committee Hearing at the Rayburn House Office Building on May 17, 2023 in Washington, DC. The hearing was held to examine the recent failures of Silicon Valley Bank and Signature Bank. (Photo by Kevin Dietsch/Getty Images)
SVBFG stressed the need to receive the cash promptly for planning purposes, and added that the $1.93 billion “should be generating more than $100 million in annual interest for the estate at current rates,” according to the filing.
SVB collapsed on March 10 and the FDIC used its DIF to rescue all of the bank’s depositors on March 13, including those with over $250,000 in deposits, which is the insured limit. SVB was the second-largest bank failure in American history at the time, according to CNN Business.
Over 70% of 1,000 likely voters surveyed did not approve of the FDIC using its DIF to bail out large depositors at SVB, according to a poll published by Convention of States Action in collaboration with The Trafalgar Group in April.
SVBFG did not immediately respond to the Daily Caller News Foundation’s request for comment.
The FDIC declined to comment.
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