First Citizens Acquires Failed Silicon Valley Bank

Following an unsuccessful auction and a few postponements, Silicon Valley Bank has ultimately secured a buyer. 

The Federal Deposit Insurance Corp. said on Sunday night that North Carolina-based First Citizens Bank & Trust Co. is acquiring all of SVB’s deposits, loans, and branches, and all 17 branches of the California-based bank will reopen under the new ownership. 

“The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First–Citizens Bank & Trust Company on Monday, March 27, 2023. 

“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First–Citizens Bank & Trust Company that systems conversions have been completed to allow full–service banking at all of its other branch locations,” FDIC said in a statement. 

The acquisition includes $119 billion in deposits and approximately $72 billion of SVB’s loans at a discount of $16.5 billion. Around $90 billion of SVB’s securities will remain under FDIC receivership. 

FDIC also said it entered into a “loss–share transaction” on all commercial loans it purchased from SVB. 

“The FDIC as receiver and First–Citizens Bank & Trust Company will share in the losses and potential recoveries on the loans covered by the loss–share agreement. The loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers. In addition, First–Citizens Bank & Trust Company will assume all loan–related Qualified Financial Contracts,” the statement said. 

The FDIC seized control of SVB on March 10 following a run on deposits. The bank’s failure will cost the Deposit Insurance Fund around $20 billion. 

This transaction represents a swift action taken by regulators to tackle one of the most significant banking collapses since the financial crisis of 2007-2008.

“With Silicon Valley Bank’s deposits and loans now housed in longer-term accommodation in the US, a calm of sorts has descended on the banking sector.

“Shunting parts of the failed bank off to a new owner may give the regulator more capacity to deal with problems still threatening to pop up elsewhere,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, told Bloomberg. 

Shares of US regional banks are sharply higher this morning after the news. First Citizens shares are up 11%, First Republic jumped 28%, and Invesco KBW Bank ETF is up more than 2%. 

However, banks might not be out of the clear yet, as they might crumble under the pressure of higher interest rates. Contagion spread last Friday as Deutsche Bank shares plunged. And there are still many concerns around the recent marriage of Swiss bank Credit Suisse and UBS

The central bank has been public enemy number one in America since 1791.

This post was originally published on this site