September 24, 2023

Troubled bank Silicon Valley Bank (SVB) was acquired by First Citizens Bank & Trust Company, which is based in Raleigh, North Carolina, according to the Federal Deposit Insurance Corporation (FDIC). First Citizens acquired all deposits and loans from SVB, as well as 17 of SVB’s branches across the United States.

Silicon Valley Bank bought by First Citizens in FDIC-mediated deal

FDIC has announced Seven days after Signature Bank was acquired by Flagstar, First Citizens Bank has acquired Silicon Valley Bank (SVB). According to the FDIC, as of March 10, 2023, SVB had total assets of $167 billion and total deposits of approximately $119 billion. The FDIC said that First Citizens Bank bought SVB’s $72 billion in assets “at a $16.5 billion discount”. The federal deposit insurance unit also said that “about $90 billion in securities and other assets will remain in receivership for disposal by the FDIC.”

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As part of the deal, the FDIC has obtained “equity appreciation rights in First Citizens Bankshares, Inc.”. With a price range of $500 million. Unlike the announcement regarding the Signature Bank acquisition, there is no mention of cryptocurrency-related material regarding the purchase of SVB. Prior to its acquisition by First Citizens, Valley National Bancorp had also expressed interest in purchasing the struggling California bank. Frank Holding Jr., CEO of First Citizens, where did it go that his company is committed to backing Venture Capital (VC) firms.

“We are committed to building on and preserving the strong relationships that SVB’s global fund banking business has inherited with private equity and venture capital firms,” ​​First Citizens’ CEO said in a statement.

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Silicon Valley Bank ‘one of the costliest bank failures in US history’

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The FDIC announced that, in addition to the acquisition of SVB, it “estimated the cost of the failure of Silicon Valley Bank’s Deposit Insurance Fund (DIF) to be approximately $20 billion.” Although the exact cost has not yet been determined, it will be known when the FDIC terminates its receivership relationship. According to economics writer Joy Politano, this estimate would make SVB one of the costliest failures in American history.

“FDIC estimates Silicon Valley bank failure will cost deposit insurance funds $20B,” Tweeted Politano. “This would make it the costliest bank failure in US history, surpassing Indimac’s ’08 failure (which cost $12.4B) and consuming 14% of the insurance fund, which was financed through an assessment on banks.” goes.” Compared to the estimated cost of Signature Bank’s DIF of around $2.5 billion, SVB’s loss is significantly higher.

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In a note sent to News, Susannah Streeter, head of money and markets at Hargreaves Lansdown, explained that the SVB acquisition has given the banking sector a brief pause. though afraid of unreal loss upset American banking system. “Developments in the beleaguered banking sector offered some respite in early trade, with Deutsche Bank rising more than 6% in early trade hit hard by such turmoil on Friday,” Streeter said. “In London, Barclays, Standard Chartered, HSBC, and Lloyds all moved higher as a little more confidence returned.”

Streeter believes divesting parts of the failed bank to a new owner could reviveulator more “capacity to deal with problems still threatening to pop up elsewhere, particularly with US regional banks.” However, the Hargreaves Lansdowne market analyst says, “The bigger concern is that they are sitting on a pile of unrealized losses, not only in their bond portfolios but also on other assets that have been battered by the storm of higher interest rates.” Streeter added:

It is feared that the commercial real estate sector could be the next weakest link as debt matures in the next few years and will need to be refinanced in a market where rates have soared, while valuations have fallen, and there is a lot of money around. There is a shortage of less money. ,

What do you think about First Citizens Bank’s acquisition of Silicon Valley Bank and the estimated $20 billion cost of the Deposit Insurance Fund? Share your thoughts on this topic in the comment section below.

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