Silicon Valley Bank Parent Files for Bankruptcy Protection

The parent company of Silicon Valley Bank, which was recently seized by the U.S., has filed for Chapter 11 bankruptcy protection.

SVB Financial Group, along with its CEO and CFO, is facing a class action lawsuit that alleges the company failed to disclose the risks of future interest rate increases.

Following its seizure by the Federal Deposit Insurance Corp, SVB Financial Group is no longer affiliated with Silicon Valley Bank. This marks the second largest bank failure in U.S. history, next to the collapse of Washington Mutual in 2008.

The FDIC is now overseeing the operations of Silicon Valley Bridge Bank, the successor to Silicon Valley Bank, and it is not included in the Chapter 11 filing.

SVB Financial Group’s Chief Restructuring Officer, William Kosturos, stated that the Chapter 11 process will allow the company to evaluate strategic alternatives for its valuable businesses and assets, particularly SVB Capital and SVB Securities.

SVB Securities and SVB Capital, its broker-dealer and venture capital/private credit fund platform, are not part of the Chapter 11 filing and are operating normally.

SVB Financial Group has approximately $3.3 billion in funded debt from unsecured notes and $3.7 billion of outstanding preferred equity. The company also holds around $2.2 billion in liquidity and is exploring strategic options for its valuable investment securities accounts and other assets.

The recent closure of Silicon Valley Bank and Signature Bank has stirred memories of the 2007-2009 financial crisis that caused the Great Recession.

In response to restore public confidence in the banking system, the federal government took action to protect all bank deposits, even those exceeding the FDIC’s individual account limit of $250,000.