Economy

SVB parent company files for bankruptcy after bank collapse

SVB Financial Group filed for Chapter 11 bankruptcy Friday following the collapse of its former subsidiary Silicon Valley Bank, the second-largest bank failure in U.S. history. 

The parent company said that Silicon Valley Bridge Bank — which was formed after the Federal Deposit Insurance Corp. took control of SVB — and other subsidiaries will continue to operate.

Federal regulators on Sunday used an emergency fund to protect SVB’s depositors, citing systematic risk to the U.S. banking system, but the bank’s shareholders and bondholders were not bailed out.

SVB Financial Group said it had $2.2 billion in liquidity and $3.3 billion in unsecured debt at the time of the bankruptcy filing. 

“SVB Financial Group will continue to work cooperatively with Silicon Valley Bridge Bank,” William Kosturos, SVB Financial Group’s chief restructuring officer, said in a statement. “We are committed to finding practical solutions to maximize the recoverable value for stakeholders of both entities.”  

SVB had $209 billion in assets at the end of last year. The bank faced hefty unrealized losses on long-term treasury bonds, prompting an online and social media-fueled bank run by its tech and venture capitalist clients who had fears about SVB’s solvency. 

The bankruptcy filing comes after SVB shareholders filed a class action lawsuit against the company, arguing that SVB’s financial statements did not accurately reflect the risks to its investments brought on by the Federal Reserve’s interest rate hikes.

The bank’s collapse sent shockwaves through the U.S. financial system and prompted fears that other banks would suffer from bank runs. A group of 11 large banks on Thursday deposited $30 billion into San Francisco’s First Republic Bank in an effort to shore up its balance sheet and boost depositors’ confidence. 

Tags bank run Bankruptcy collapse Silicon Valley Bank

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