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The US bank regulator is mulling legal action against former SVB executives.
WASHINGTON, December 17 (Reuters) The chairman of a major US banking regulator announced Tuesday that his agency is considering legal action against six former officers and eleven former directors of Silicon Valley Bank.
Chairman of the Federal Deposit Insurance Corporation, Martin Gruenberg, said in a statement that the agency was considering suing the former bank executives, who were not named, for “breaches of duty” in mismanaging Silicon Valley Bank’s portfolio prior to its abrupt collapse last spring.
Gruenberg, a Democrat appointed by President Joe Biden, has stated that he intends to retire from the agency on January 19. However, the decision to authorize prospective legal action was unanimously accepted by the FDIC board, which comprises both Democrats and Republicans.
The FDIC took over Silicon Valley Bank (SVB) in March 2023 after the bank experienced a significant run on its deposits after announcing that it needed to raise more capital to cover portfolio losses. Gruenberg stated in his prepared statements, delivered during a closed meeting of the FDIC board, that the bank’s leadership mismanaged key parts of the bank’s finances, resulting in its failure.
To prevent a broader panic in the banking industry, the FDIC was authorized to guarantee all of the bank’s deposits, including huge amounts of uninsured deposits, at a cost of an estimated $23 billion to its deposit insurance fund.
“As a result of the mismanagement… SVB suffered billions of dollars in losses for which the FDIC as Receiver has both the authority and the responsibility to recover,” according to the statement he issued.
Though meeting chair Luis Vayas Valdivieso attempted to strike a cheerful tone:
Gruenberg previously testified before Congress that the FDIC was looking into suspected misbehavior by SVB management.The FDIC has previously pursued legal action against executives of bankrupt banks. According to the FDIC’s website, the agency recovered $4.48 billion from executives of insolvent banks under its professional liability program between 2008 and 2023.
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