SAN JOSE, Calif.—A federal judge has rejected a $1.71-billion claim against the FDIC by the successor to Silicon Valley Bank’s former parent, finding that negligent decisions by the holding company’s officers caused at least $5.4 billion in damage to the failed bank—more than offsetting the disputed deposit, The Wall Street Journal reported.
Following a 12-day bench trial, U.S. District Judge Beth Labson Freeman found that executives took excessive interest-rate and liquidity risks by investing heavily in long-term government and mortgage-backed securities, Reuters reported. Rising rates produced at least $4.52 billion in investment losses and helped trigger the March 2023 bank run that brought down the $209-billion institution.
Freeman also found that executives removed some interest-rate hedges and approved a $294-million dividend from the bank to its parent while the bank was in dire financial condition, according to Bloomberg Law. The judge held that the officers breached their fiduciary duties and that the holding company must bear responsibility for their decisions, although she did not find bad faith or willful misconduct.
SVB Financial Trust had argued the FDIC improperly withheld money the parent had deposited at the bank after regulators guaranteed all deposits, the Journal reported. The ruling comes as the FDIC separately pursues claims against 17 former SVB executives and directors, including former CEO Gregory Becker, alleging gross negligence and fiduciary breaches, Reuters said. Earlier, CUToday.info reported that another federal court recognized the FDIC’s authority as receiver to control a separate $73-million SVB recovery claim.