On Thursday, the Federal Deposit Insurance Corporation (FDIC) filed a lawsuit against 17 former executives and directors of Silicon Valley Bank (SVB), seeking to recover billions of dollars for alleged gross negligence and breaches of fiduciary duty that contributed to the bank’s collapse in March 2023. The failure of SVB was one of the largest banking disasters in U.S. history.
The complaint, filed in San Francisco federal court, claims that the defendants ignored essential banking standards and risk management policies. This led the bank to take on excessive risks, all in an effort to boost short-term profits and stock prices. According to the FDIC, the bank’s overreliance on unhedged, interest-sensitive long-term government bonds—such as U.S. Treasuries and mortgage-backed securities—was a key factor in its downfall, especially as interest rates began to rise.
In addition, the FDIC criticized the payment of a “grossly imprudent” $294 million dividend to SVB’s parent company in December 2022, just months before the collapse. This payout drained critical capital at a time when the bank was already facing financial distress.
The complaint highlights that the management of interest-rate and liquidity risks by the bank’s former executives and directors was grossly negligent. Among those named in the lawsuit are former Chief Executive Gregory Becker, former Chief Financial Officer Daniel Beck, and former Chief Risk Officer Laura Izurieta. Izurieta’s lawyers called her inclusion in the suit “outrageous,” asserting she had offered sound risk management advice before stepping down in 2022, well before the bank’s failure.
The collapse of Silicon Valley Bank on March 10, 2023, sent shockwaves through the financial world, particularly disrupting technology startups that relied on the bank for deposits. Many customers were also affected as a significant portion of SVB’s deposits were uninsured. The fallout from SVB’s failure led to the collapse of two other banks, Signature Bank and First Republic Bank, raising concerns about the stability of the banking sector.
SVB’s assets at the time of its failure were valued at $209 billion, making it one of the largest U.S. banking failures in recent memory. Following the collapse, First Citizens BancShares acquired SVB’s deposits and loans in an FDIC-arranged sale.
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