On March 10, 2023 it was announced that Silicon Valley Bank (“SVB”) effectively “collapsed” in the largest bank failure since the 2007–2008 financial crisis. Regulators seized and transferred SVB into a receivership under the Federal Deposit Insurance Corporation (“FDIC”) which created bridge banks to assume the deposits and obligations of SVB’s banking business while the FDIC oversees the attempts to sell the business. A week later, a class action lawsuit was filed against SVB’s parent company, SVB Financial Group. By Friday, March 17, 2023, SVB Financial Group filed Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York. Since the SVB banking units have been seized and placed into a receivership by the FDIC, they are not part of their former parent’s bankruptcy.
On March 20, 2023, the FDIC, as receiver for SVB, filed an objection to SVB Financial Group’s motion in the bankruptcy court seeking to transfer its accounts with SVB bridge banks to a new financial institution. The objection appears to reflect the dispute that will ensue over the limited assets, with SVB Financial Group, on the one hand, seeking assets to distribute to its creditors in bankruptcy and the FDIC, on the other hand, seeking to maintain assets for the benefit of SVB banking units in receivership.
