The bankrupt parent of the failed Silicon Valley Bank is seeking access to frozen funds from regulators who seized the banking unit and withdrew $2 billion of its cash.
SVB Financial Group, which filed for bankruptcy on Friday, in court documents accused the FDIC of “improper actions” to cut off access to cash on deposit at its former banking unit, which was seized by regulators to stop a national bank run.
Although the FDIC guaranteed uninsured deposits at Silicon Valley Bank, including the parent company’s cash deposits, regulators said they had frozen SVB Financial’s accounts as part of an ongoing investigation into potential claims against the parent company.
Meanwhile, Wall Street CEOs and US officials are discussing the possibility of government backing to encourage potential buyers of the battered First Republic Bank, according to Bloomberg News.
The government could play a role by taking over First Republic’s most troubled assets, as well as offering liability protection or lowering limits on ownership interests for a potential buyer, the report said, citing people with knowledge of the situation. .
SVB Financial, which filed for bankruptcy on Friday, in court documents accused the FDIC of “improper actions” in cutting off access to its cash on deposit at its former banking unit.
Wall Street extended its rally on Tuesday as fears of a broader banking crisis eased. The Dow Jones Industrial Average rose 316 points, or 1 percent, at the close
First Republic Bank shares sank as much as 18 percent in extended trading, after rising 29 percent at the closing bell and major regional bank shares higher.
In Tuesday’s session, Wall Street extended its Tuesday rally as fears of a broader banking crisis eased and investors turned their attention to the Federal Reserve’s next move.
The Dow Jones industrial average rose 316 points, or 1 percent, at the close of trading after Treasury Secretary Janet Yellen said the government could offer more assistance to the banking industry if needed.
Markets around the world have soared this month on concern that the banking system may be collapsing under the pressure of the fastest series of interest rate hikes in decades.
Global markets are now turning their attention to Federal Reserve policymakers, who will announce on Wednesday whether they plan to continue raising interest rates to combat inflation or pause rate hikes to calm the chaos in the banking sector.
On Tuesday night, financial markets were trading at a nearly 90 percent chance that the Fed would go ahead with a 25 basis point rate hike.
The banking crisis began with the collapse this month of two US lenders, Silicon Valley Bank and Signature Bank, which sank under the weight of bond-related losses due to rising interest rates last year.
The turmoil culminated over the weekend with the Swiss government’s $3.2 billion acquisition of Credit Suisse by rival UBS, allaying fears the global banking giant could fail.
“The near-death experience of the banking sector over the past two weeks is likely to make Fed officials more measured in their stance on the pace of hikes,” said Steve Englander, G10 director of currency research. from Standard Chartered.
Wall Street CEOs and US officials are discussing the possibility of government backing to encourage potential buyers of the battered First Republic Bank.
First Republic Bank shares sank as much as 18 percent in extended trading, after rising 29 percent at the closing bell and shares of major regional banks higher.
The fallout from the collapse of Silicon Valley Bank continued this week in bankruptcy court, where former parent SVB Financial sought access to frozen deposits.
SVB Financial’s lawyer told US bankruptcy judge Martin Glenn at a hearing in Manhattan on Tuesday that the financial company lost access to its deposits the day before it filed for Chapter 11 protection.
“They didn’t just take the bank, they took all the cash,” said James Bromley, a lawyer at SVB Financial. Bromley told Glenn that without access to cash, SVB Financial was unable to pay for employees’ health care costs.
Bromley said he hopes to create a working group with regulators to determine which employees work for the parent and which for the seized bank, among other complications.
California banking regulators closed Silicon Valley Bank on March 10 in the biggest US bank failure since the 2008 financial crisis.
The company said in court documents that the FDIC trustee blocked a $250 million wire transfer, withdrew $19 million from an SVB Financial bank account, and attempted to recover payments to SVB Financial bankruptcy attorneys and financial advisors, among other things.” improper actions”.
The company has asked the judge to allow it to transfer the funds it has in Silicon Valley Bank to another bank.
But the FDIC said in court documents Tuesday that it had suspended all bank accounts at SVB Financial, as part of its investigation of potential claims against the bank’s former parent.
That action was a legal and necessary part of stabilizing banking operations during the transfer to the new administration, according to court documents.
SVB Financial and two top executives were sued last week by shareholders who accused them of concealing how raising interest rates would leave the Silicon Valley Bank unit “particularly susceptible” to a run on the banks.
In the latest effort to calm jitters, Secretary Yellen said the country’s banking system was strong despite recent pressure.
SVB Financial has $3.4 billion in debt and manages about $9.5 billion of other investors’ money in its portfolio of venture capital and loan funds, according to court documents.
Silicon Valley Bank was SVB Financial’s largest asset, accounting for more than $15.5 billion of SVB Financial’s $19.7 billion in total assets.
In the latest effort to calm jitters, Secretary Yellen said the country’s banking system was strong despite recent pressure.
Yellen said she was committed to taking steps that would mitigate risks to financial stability and take steps to ensure the safety of deposits and the American banking system.
Political pressure continued to mount in the United States to hold bank executives accountable. The chairman of the Senate Banking Committee said the panel will hold the “first of several hearings” on the collapse of SVB and Signature Bank on March 28.