By Pete Schroeder
WASHINGTON (Reuters) – The chairman of a number one U.S. banking regulator mentioned Tuesday his company is contemplating authorized motion towards six former officers and eleven former administrators of Silicon Valley Financial institution.
Federal Deposit Insurance coverage Company Chairman Martin Gruenberg mentioned in an announcement that the company was contemplating suing the previous financial institution executives, who weren’t particularly named, as a consequence of their “breaches of obligation” in mismanaging Silicon Valley Financial institution’s portfolio earlier than its abrupt collapse final spring.
Gruenberg, a Democrat appointed by President Joe Biden, has mentioned he plans to retire from the company on Jan. 19. However the resolution to authorize potential authorized motion was unanimously authorised by the FDIC board, which incorporates each Democrats and Republicans.
The FDIC took over Silicon Valley Financial institution (SVB) in March 2023 when the financial institution suffered a sudden run on its deposits after reporting that it wanted to boost extra capital to offset losses on its portfolio. Gruenberg mentioned in his ready remarks, which got here as a part of a closed assembly of the FDIC board, that the financial institution’s management had mismanaged a number of facets of the financial institution’s funds, precipitating its collapse.
In a bid to stave off a broader panic throughout the banking system, the FDIC was licensed to backstop all of the deposits on the financial institution, together with massive quantities of uninsured deposits, costing its deposit insurance coverage fund an estimated $23 billion.
“On account of the mismanagement… SVB suffered billions of {dollars} in losses for which the FDIC as Receiver has each the authority and the duty to get well,” he mentioned in his assertion.
Gruenberg beforehand testified to Congress that the FDIC was investigating potential misconduct by SVB executives.
The FDIC has pursued authorized motion towards executives at failed banks previously. The FDIC web site states that from 2008 to 2023, the company recovered $4.48 billion from executives at failed banks by way of its skilled legal responsibility program.
