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I have 10 million USD deposited with Silicon Valley Bank. Now that they are liquidated, let's say I get to recover FDIC insured 0.25 million plus 5.75 million, total 6 million.

At the same time, I owe Silicon Valley Bank 4 million dollars. What happens? Do the unrecovered deposits and loan cancel each other out? Or do I have to pay them back 4 million?

feetwet
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  • If you are lucky, your 4 million debt is cancelled against 4 million of your deposit, then you get 250k + x percent of 5.75 million. If you are unlucky, you get 250k + x percent of 9.75 million and have to pay 4 million. What will not happen is that you get 250k + x percent of 9.75 million and your debt is cancelled against the (100 - x) percent of 9.75 million. – gnasher729 Mar 12 '23 at 14:37
  • You will get more than 60% in the long term. Herstatt paid back 97% of deposits over the course of 30 years. SVB will probably be less, maybe 90%. And you have to repay the 4 million when it's due, not earlier. – gnasher729 Mar 12 '23 at 18:08

1 Answers1

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Your liabilities are not canceled out with your claims automatically. If this is a real story, it's best to talk to a lawyer familiar with bankruptcy proceedings.

You still owe money to whoever owns the bankrupt bank now - that is, to the State of California. This debt stands to be collected.

During the bankruptcy, your claim will be resolved in order of priority. After FDIC payout, the rest of your deposit will be priority unsecured debt. It is prioritized after priority payments and secured debts, but before non-priority unsecured debt.

It is theoretically possible to lose the full deposit and still be liable for the debt.

Therac
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