Class-action lawsuit seeking damages alleges that tech-focused bank failed to disclose risks from interest rate hikes.

Silicon Valley Bank’s parent company and two senior executives are facing a class-action lawsuit in the United States, where shareholders have accused the financial institution of failing to disclose the risks that anticipated interest rate hikes would have on its business.

The lawsuit, filed in federal court in the Northern District of California on Monday, is seeking unspecified damages from SVB Financial Group and its Chief Financial Officer Daniel Beck, as well as the bank’s Chief Executive Officer Greg Becker.

The bank collapsed and its assets were seized by the US government late last week after a mass withdrawal of funds by customers.

The lawsuit, which accuses SVB of violating federal securities laws, noted that the Federal Reserve, the US central bank, had signalled as early as 2021 that it would increase interest rates to tame inflation.

Lawyers for the shareholders said in the filing that annual bank reports “understated the risks posed to the company by not disclosing that likely interest rate hikes, as outlined by the Fed, had the potential to cause irrevocable damage to the company”.

Class-action lawsuits allow plaintiffs to sue on behalf of a larger group of people in a similar situation, in this case SVB’s shareholders. The lead plaintiff in the lawsuit is Chandra Vanipenta, who the legal filing said bought shares in the company at “artificially inflated prices”.

“Had plaintiff and the other members of the Class been aware that the market price of the company’s securities had been artificially and falsely inflated, … they would not have purchased the company’s securities at the artificially inflated prices that they did, or at all,” the lawsuit said.

SVB Financial Group did not immediately respond to Al Jazeera’s request for comment.

SVB was the 16th largest bank in the US when it collapsed on Friday. Specialised in lending to technology start-ups and the venture capitalists who finance them, it had invested much of its money in US government bonds, whose value fell as interest rates rose.

SVB’s failure was followed by the collapse of Signature Bank, another US financial firm, raising fears of a broader economic fallout similar to the 2008 financial crisis.

US President Joe Biden’s administration moved quickly to respond to the banking failures, with his government guaranteeing the money of all depositors at both banks, even those that were uninsured.

“This step will ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” US government financial agencies said in a joint statement on Sunday.

A day later, Biden also pushed to reassert confidence in the US banking system, saying, “Americans can rest assured that our banking system is safe.”

Banking stocks showed signs of recovery on Tuesday after tumbling over the past few days.

Reporting from New York City, Al Jazeera’s Gabriel Elizondo said the Biden administration’s moves to quell depositors’ concerns seemed to be working.

“What the market is essentially signalling here is that it appears that the worst is over and that this will not spread to the wider banking sector in the US – at least not yet,” Elizondo said.