SVB Financial Group accuses the FDIC of cutting it off from cash

March 21 (Reuters) – SVB Financial Group ( SIVB.O ) said on Tuesday that the U.S. Federal Deposit Insurance Corporation had taken “inappropriate actions” to cut it off from cash held at former subsidiary Silicon Valley Bank, which was seized by regulators to stop a national bank run.

SVB Financial made the allegations in court filings ahead of its first bankruptcy hearing Tuesday afternoon in Manhattan. It filed for Chapter 1[ads1]1 protection about a week after California banking regulators on March 10 shut down Silicon Valley Bank in the biggest U.S. bank failure since the 2008 financial crisis.

The collapse this month of the Santa Clara, Calif.-based bank and Signature Bank ( SBNY.O ), another mid-sized U.S. lender, sent a rumble in bank stocks as investors worried about other ticking bombs in the banking system and led to UBS Group AG’s takeover of 167-year-old Credit Suisse Group AG to avert a major crisis.

SVB Financial is exploring options, including a potential bankruptcy sale, for its venture capital and investment banking units, which were not included in the FDIC takeover of Silicon Valley Bank, while continuing to operate its businesses, it said Monday.

The company, which has about $2 billion in cash in its former subsidiary, said in court documents that the FDIC receiver had blocked a $250 million wire transfer, removed $19 million from an SVB Financial bank account and tried to claw back payments to SVB Financials bankruptcy attorneys and financial advisors, among other “improper acts.”

The company has asked U.S. Bankruptcy Judge Martin Glenn, who is overseeing the Chapter 11 process, to allow it to move funds held at Silicon Valley Bank to another bank.

But the FDIC said in Tuesday’s court filings that it had placed a freeze on all of SVB Financial’s bank accounts as part of its investigation into potential claims against the bank’s former parent. This action was a legal and necessary part of stabilizing the banking business during the transfer to new management, according to the court documents.

SVB Financial and two top executives were sued last week by shareholders who accused them of concealing how rising interest rates would make the Silicon Valley Bank unit “particularly vulnerable” to a bank run.

SVB Finans did not immediately respond to a request for comment.

SVB Financial has $3.4 billion in debt and manages about $9.5 billion of other investors’ money across its portfolio of venture capital and credit funds, according to court filings. Silicon Valley Bank was SVB Financial’s largest asset, accounting for more than $15.5 billion of SVB Financial’s $19.7 billion in total assets.

Reporting by Dietrich Knauth in New York and Tom Hals in Wilmington, Delaware Editing by Alexia Garamfalvi and Matthew Lewis

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