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1 1 (April 7, 2023)

handle is hein.crs/govelex0001 and id is 1 raw text is: Congressional S£ Research Service Silicon Valley Bank's Failure and Potential Director/Officer Liability April 7, 2023 On March 10, 2023, a California banking regulator closed Silicon Valley Bank (SVB), making it the second-largest bank by assets to fail in U.S. history. At the same time, the state regulator appointed the Federal Deposit Insurance Corporation (FDIC) as SVB's receiver to liquidate the institution, sell its assets, and pay claims against it. As receiver, the FDIC assumed all of the rights, powers, and obligations of SVB's officers, directors, and shareholders. SVB's collapse prompted funding pressures at other banks, along with private and governmental emergency interventions aimed at protecting depositors and preventing the failure of other institutions. Questions abound about the causes of this distress. Since the FDIC has taken over SVB, a number of reports have surfaced that have raised questions about the potential culpability of the failed bank's former officers and directors. For example, there are reports that: SVB's primary federal regulator-the Board of Governors of the Federal Reserve System (Fed)-had, over the course of the last year and a half, issued SVB six supervisory warnings. These Matters Requiring Attention and Matters Requiring Immediate Attention reportedly concerned the bank's risk management practices. In early 2023, the Fed subjected the bank to a horizontal (cross-bank) examination regarding interest-rate risk, which identified additional deficiencies. SVB offered some of the most generous compensation packages among publicly traded banks. The bank also paid out bonuses to employees hours before the federal takeover. SVB executives sold millions of dollars of company stock shortly before the bank's collapse. The FDIC has estimated that SVB's failure will cost its Deposit Insurance Fund roughly $23 billion. These reports have raised concerns that mismanagement caused SVB's failure and that executives reaped significant financial rewards despite the institution's collapse and associated costs to third parties. These reports have also prompted calls, including from some Members of Congress and the President, to hold SVB officers and directors accountable for the bank's downfall. Specifically, there have been calls for the federal government to recoup bonuses and other forms of compensation recently paid to SVB's officers Congressional Research Service https://crsreports.congress.gov LSB10946 CRS Legal Sidebar Prepared for Members and Committees of Congress

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