US judge rejects $1.71 billion SVB claim against FDIC

A U.S. District Judge has ruled that the former parent company of Silicon Valley Bank (SVB) cannot pursue a $1.71 billion claim against the Federal Deposit Insurance Corp (FDIC) following the bank’s March 2023 collapse.

In a 206-page decision, Judge Beth Labson Freeman of the U.S. District Court for the Northern District of California stated that SVB executives, including the CFO and treasurer, breached their fiduciary duties. The court found that these individuals acted negligently by taking on excessive interest-rate and liquidity risks to boost profits through heavy investments in long-term government bonds and mortgage-backed securities.

The judge noted that the holding company, now succeeded by SVB Financial Trust, established the policies and metrics that led to these decisions. Freeman wrote, “Having made this choice, it must live with the consequences.”

Silicon Valley Bank’s failure was driven by rising interest rates that caused over $4.52 billion in losses within its investment portfolio, triggering a bank run among its largely uninsured technology-sector depositors. The collapse was one of the largest bank failures in U.S. history.