Silicon Valley Bank’s former owner sues US watchdog for $1.9bn

Federal Deposit Insurance Corporation accused in lawsuit of violating US bankruptcy law.

SVB Financial Group, the former owner of the bankrupt Silicon Valley Bank (SVB), has sued a financial regulator in the United States in a bid to claw back more than $1.9bn.

In a lawsuit, SVB Financial said the US Federal Deposit Insurance Corporation (FDIC) violated US bankruptcy law by keeping $1.93bn in cash after taking over the group’s banking arm earlier this year.

The FDIC’s failure to return the funds to SVB Financial was “impeding its ability to reorganise” and “causing harm to the Debtor on a continuous basis”, the group said in the lawsuit filed in New York on Sunday, according to the Financial Times.

The FDIC did not immediately respond to a request for comment.

The FDIC seized Silicon Valley Bank’s assets in March, marking the biggest bank collapse since Washington Mutual at the peak of the 2008 financial crisis.

At the time of its takeover, SVB was the 16th largest bank in the US with assets and deposits of $209bn and $175.4bn, respectively, according to the FDIC.

SVB, which mostly serviced the tech industry, collapsed after depositors began withdrawing their deposits in panic following the bank’s surprise announcement it would seek $2.25bn to shore up its balance sheet.

The bank’s failure at the time sparked concerns about the overall health of the US banking sector, although the fallout ultimately did not extend beyond the collapse of several other mid-size banks.