On Dec. 17, FDIC approved suing Silicon Valley Bank executives.
FDIC issued memorandum and resolution from Chairman approving request for authority to sue 6 former officers and 11 former directors of Silicon Valley Bank (SVB).
Discussed in FDIC Board of Directors closed session on Dec. 17th, at 10:30 a.m., ET.
Request Summary
Request for authority to sue is the culmination of investigation by FDIC's Professional Liability and Financial Crimes Section and Division of Resolutions and Receiverships.
Chairman Martin J. Gruenberg supported authority request to hold former officers and directors accountable for breaches of duty in mismanaging investment portfolios.
Exposed SVB to significant risks, caused SVB to incur billions of dollars in losses, and resulted in a loss to the Deposit Insurance Fund currently estimated at $23 billion.
On Mar. 8, 2023, SVB announced that it had sold securities at a loss to meet deposit withdrawals since the second quarter of 2022 and planned to raise capital.
Allegations
Former directors and officers mismanaged SVB's held-to-maturity (HTM) securities portfolio by purchasing long-dated securities in a rising interest rate environment.
Breached key internal risk metrics, and allowed an over-concentration of such assets.
Exposed SVB to significant interest rate risk as value declined as interest rates rose.
Also mismanaged the Bank’s available-for-sale (AFS) securities portfolio by removing interest rate hedges in the AFS portfolio at a time of increasing interest rates.
Former directors and officers permitted imprudent payment of bank-to-parent dividend from SVB to the holding company while the Bank was experiencing financial distress.
