SVB Financial Group, the bankrupt former parent of Silicon Valley Bank, is losing $9 million a month in interest on deposits that were trapped when federal regulators took over the failed bank, a lawyer said in court Tuesday.
SVB Financial wants nearly $2 billion in deposits put into a court-controlled account while the holding company fights over the cash with the Federal Deposit Insurance Corp., according to court papers. The agency hasn't provided a good reason for refusing to make payment on the deposits, SVB argues.
The money is key to repaying bondholders owed billions of dollars by SVB Financial. FDIC lawyers have said in court that the defunct bank holding company must apply for the money like any other depositor.
As an arm of the U.S. government, the FDIC cannot be forced to pay interest on the disputed cash, Ben Finestone, a lawyer for the agency, said in bankruptcy court Tuesday.
U.S. Bankruptcy Judge Martin Glenn will consider putting the money into escrow while the two sides continue their legal battle over the deposits. When Silicon Valley Bank entered FDIC receivership in March, the agency agreed to honor all deposits, even those exceeding the $250,000 limit.
SVB Financial sued the FDIC in bankruptcy court, asking Glenn to order the FDIC to immediately turn over the deposits.
The FDIC has not yet decided whether the cash should be given to SVB Financial, the agency said in court papers filed last week. The agency argued that Glenn does not have the legal authority to order the FDIC to give the money back. The bankruptcy case is SVB Financial Group, 23-10367, US Bankruptcy Court for the Southern District of New York.
