SVB Monetary Group and the federal regulator that closed its Silicon Valley Financial institution unit indicated at a chapter court docket listening to on Tuesday {that a} battle is looming over $2 billion of the previous guardian firm’s money that was seized together with the lender.
SVB Monetary, which filed for chapter on Friday, had mentioned in court docket papers the U.S. Federal Deposit Insurance coverage Company took “improper actions” to chop off the guardian firm from its money held at its former subsidiary, which was seized by regulators to stem a nationwide financial institution run.
SVB Monetary’s lawyer advised U.S. Chapter Decide Martin Glenn at a listening to in Manhattan that the monetary firm misplaced entry to its deposits the day earlier than it filed for Chapter 11 safety.
“Not solely has the financial institution been taken, all of the money has been taken,” mentioned James Bromley, an lawyer for SVB Monetary.
California banking regulators on March 10 closed Silicon Valley Financial institution within the largest U.S. financial institution failure for the reason that 2008 monetary disaster.
The collapse of the Santa Clara, California-based financial institution and Signature Financial institution, one other U.S. midsized lender, prompted a rout in banking shares as traders frightened about different ticking bombs within the banking system and led to UBS Group AG’s takeover of 167-year-old Credit score Suisse Group AG to avert a wider disaster.
Kurt Gwynne, an lawyer for the FDIC as receiver for Silicon Valley Financial institution, disputed at Tuesday’s listening to that regulators had finished something improper. He additionally mentioned there could also be fights over the cash SBF Monetary had on deposit on the financial institution.
“There was nothing improper with freezing accounts and attempting to guard deposits” earlier than the chapter submitting, Gwynne mentioned.
Marshall Huebner, an lawyer representing collectors who maintain greater than half of SVB Monetary’s bond debt, mentioned in court docket that the FDIC shouldn’t be allowed maintain the guardian firm’s deposits indefinitely whereas collectors are owed $3.4 billion.
Gwynne mentioned that the FDIC and different regulators took steps to insure all financial institution deposits as a method of stopping a banking panic and with out these steps, there could be nothing of worth at SVB Monetary to battle over.
He additionally mentioned that SVB Monetary was not only a depositor, but in addition a shareholder of the financial institution and shareholders weren’t being protected by regulators.
Glenn mentioned he didn’t consider presently that the FDIC acted improperly.
Bromley mentioned there have been bidders for SVB Monetary’s companies, which embody enterprise capital and funding banking models. These models had been excluded from the FDIC takeover.
Whereas SVB Monetary misplaced entry to round $2 billion, it nonetheless has entry to over $180 million in accounts at different banks. Glenn mentioned he was ready to permit SVB Monetary to make use of as much as $100 million for funding exercise.
The FDIC has mentioned in court docket filings that it’s holding SVB Monetary’s funds whereas investigating potential claims in opposition to it.
SVB Monetary and two high executives had been sued final week by shareholders who accused them of concealing how rising rates of interest would depart the Silicon Valley Financial institution unit “notably inclined” to a financial institution run.
SVB Monetary has $3.4 billion in debt and it manages about $9.5 billion of different traders’ cash throughout its portfolio of enterprise capital and credit score funds, in keeping with court docket filings.
Silicon Valley Financial institution was SVB Monetary’s largest asset, accounting for greater than $15.5 billion of SVB Monetary’s $19.7 billion in whole property.
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