SVB parent company files for bankruptcy — RT World News

The filing comes days after a class action lawsuit accused the financial group of failing to disclose the risks

SVB Financial Group, the parent company of Silicon Valley Bank that was bankrupt before its takeover by regulators last week, has filed for Chapter 11 bankruptcy, the bank said in a statement Friday.

While Silicon Valley Bank was seized by the Federal Deposit Insurance Corporation after its value plummeted following a bank run last Friday, the rest of the SVB Financial Group, which consists of a capital fund -risk and private credit, a registered broker and approximately $2.2 billion in liquid assets, will be sold in an effort to repay creditors and large depositors, although this will not cover all those who have lost money in the collapse, and a legal battle is expected to follow.

Earlier this week, a shareholder lawsuit in the U.S. District Court for the Northern District of California alleged that several of SVB’s quarterly and annual financial reports failed to fully disclose risks communicated by the Federal Reserve between 2020 and 2022 that impending interest rate hikes “had the potential to cause irrevocable damage to the business”, or that the losses thus incurred could trigger a bank run.

While the FDIC only covers customer deposits below $250,000, President Joe Biden’s administration stepped in after the collapse of SVB to insure those above that amount, harassing critics who see it as a bailout being made. pass for a regulatory measure. While the largest deposits will be expected to be covered by an insurance fund paid for by bank charges rather than taxpayers’ money, as seen during the financial crash of 2008, an excessively high percentage – 94 %- of SVB deposits exceeded the $250,000 threshold, about double the typical share. in other banks. Senate Republicans pointed out earlier this week that banks that did not fail would be unfairly penalized when their own rates rise to cover large payments to depositors, costs that would ultimately be passed on to the taxpayer, putting them on the back foot. hook for a bailout after all.

New York-based Signature Bank collapsed just days after SVB, raising fears of wider contagion even as the president tried to reassure Americans of the safety of their finances. As with SVB, 90% of its deposits exceeded the FDIC limit.

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