© Reuters. A U.S. flag flies outside a branch of the Silicon Valley Bank in Wellesley, Massachusetts, U.S., March 13, 2023. REUTERS/Brian Snyder
(Reuters) -Bankrupt SVB Financial Group has sued the U.S. Federal Deposit Insurance Corp (FDIC) to recover the $1.93 billion that the regulator seized while it took over Silicon Valley Bank in March, a filing in a bankruptcy court on Sunday showed.
The group said inability to access the funds was affecting its reorganization as the money should be generating more than $100 million in annual interest. Without that, it might have to seek costly and uncertain “debtor-in-possession” financing.
The FDIC and the bank are embroiled in a dispute over the regulator’s effort to recoup the cost of rescuing Silicon Valley Bank.
The lender collapsed in March after a deposit flight that triggered the worst U.S. banking crisis in 15 years and led to the failure of two other regional banks.
The regulator guaranteed all deposits of Silicon Valley Bank and later brokered a deal for regional lender First Citizens BancShares to buy the failed bank.
The complaint alleged that the FDIC induced SVB Financial to keep its cash at the failed bank, only to later seize it.
The FDIC guaranteed “all” deposits to prevent a run on the bank, but later carved out SVB Financial’s own funds from that guarantee, the complaint said.
SVB Financial filed for bankruptcy protection and last month agreed to sell its investment banking unit to a group led by the chief executive of the business. It is still exploring options for its venture capital and credit investment arm.
The FDIC has said that Silicon Valley Bank’s failure drained its insurance fund by $16 billion and it is legally able to hold the seized funds while it determines SVB Financial’s share of the rescue costs.
While the FDIC asserted it has claims against the company to justify its refusal to pay, it has not identified any of them “despite having numerous opportunities,” SVB Financial alleged.
The FDIC declined to comment.
In May, a U.S. bankruptcy judge had ordered the FDIC to return $10 million in seized tax refund checks to SVB Financial.
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