Key facts
- A U.S. judge dismissed a $1.71 billion claim by SVB Financial Trust against the FDIC.
- The judge ruled the trust was responsible for executives' decisions to invest in long-term government bonds and mortgage-backed securities.
- Silicon Valley Bank collapsed in March 2023 due to at least $4.52 billion in losses from its investment portfolio amid rising interest rates.
- The ruling was made by U.S. District Judge Beth Labson Freeman in San Jose, California.
- The FDIC is pursuing separate legal action against 17 former SVB executives and directors.
A U.S. judge has dismissed a $1.71 billion claim brought by the former parent of Silicon Valley Bank against the Federal Deposit Insurance Corp (FDIC), stemming from the bank's collapse in March 2023. U.S. District Judge Beth Labson Freeman ruled that SVB Financial Trust, which inherited the parent company's claims, was responsible for the decisions made by former executives to invest heavily in long-term government bonds and mortgage-backed securities.
Freeman stated in her 206-page decision that the bank's chief financial officer, treasurer, and others acted negligently by taking excessive interest rate and liquidity risks, with encouragement from the board of directors. She rejected arguments that the trust was protected by the business judgment rule, emphasizing that the holding company must "live with the consequences" of its established policies.
Silicon Valley Bank failed after rising interest rates caused at least $4.52 billion in losses within its investment portfolio, triggering a bank run. The collapse, one of the largest U.S. bank failures, was followed by the failures of Signature Bank and First Republic Bank later in 2023. Silicon Valley Bank had approximately $209 billion in assets before its demise. The FDIC is also pursuing separate legal action against 17 former executives and directors, including ex-CEO Gregory Becker, seeking billions for alleged gross negligence and breaches of fiduciary duty.