Legal Action Consideration Against Former Silicon Valley Bank Executives

By Pete Schroeder
WASHINGTON (Reuters) – The chairman of a leading U.S. banking regulator announced on Tuesday that his agency is considering legal action against six former officers and eleven former directors of Silicon Valley Bank (SVB).

Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg stated that the agency is contemplating suing these former bank executives for their "breaches of duty" in mismanaging the bank's portfolio prior to its abrupt collapse last spring.

Gruenberg, a Democrat appointed by President Joe Biden, plans to retire from the agency on January 19. Nonetheless, the decision to potentially authorize legal action was unanimously approved by the FDIC board, which consists of both Democrats and Republicans.

In March 2023, the FDIC took control of Silicon Valley Bank after it faced a sudden run on deposits, subsequent to disclosing a need to raise more capital to cover losses in its portfolio. Gruenberg emphasized that the bank's leadership had mismanaged various financial aspects, contributing to the institution's downfall.

To prevent wider panic throughout the banking sector, the FDIC was authorized to guarantee all deposits at the bank, including substantial amounts of uninsured funds, which is projected to cost its deposit insurance fund around $23 billion.

"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," Gruenberg remarked in his statement.

He previously commented to Congress that the FDIC is probing potential misconduct by SVB executives. Historically, the FDIC has taken legal action against executives of failed banks. According to the FDIC's website, from 2008 to 2023, the agency has recovered $4.48 billion from executives of failed banks through its professional liability program.