First Citizens BancShares Buys Failed Silicon Valley Bank
First Citizens BancShares, the 30th largest commercial bank in the United States based in North Carolina, has agreed to acquire the assets of Silicon Valley Bank (SVB), a California lender whose sudden collapse earlier this month sent shock waves across the financial sector
The Federal Deposit Insurance Corporation (FDIC) seized control of SVB on March 10, 2023, after a run on deposits had left it insolvent. Since then, the FDIC has been looking for a buyer for the bank, either in its entirety or in pieces.
In accordance with the agreement, 17 former SVB branches will reopen as First-Citizens Bank & Trust Corporation on March 27, 2023. All SVB depositors will instantly become First Citizens Bank depositors.
According to the statement published yesterday, the deal for the bank included the purchase of about $72 billion of assets, at a discount of $16.5 billion. To maximize recoveries and minimize interruptions for loan customers, the acquisition will also include a loss-share transaction in which the FDIC will bear a portion of the loss on a specific pool of assets.
The regulator stated that the expected cost to the Deposit Insurance Fund (DIF) of SVB's failure is approximately $20 billion, with the precise cost to be established once the receivership is terminated.
“Approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC”, the statement reads. The regulator will also receive equity appreciation rights in First Citizens BancShares with a potential value of up to $500 million.
SVB was the country's 16th-largest bank when the government took it over The bank's failure was the largest in the United States since the 2008 financial crisis. The abrupt collapse of SVB earlier this month stunned investors and regulators. In response to rising interest rates, the bank suffered a substantial loss on the sale of its securities, causing a dramatic run on deposits. On March 9 alone, investors and depositors attempted to withdraw almost $42 billion, prompting regulators to take the bank and begin the process of finding a buyer.
In an attempt to safeguard the uninsured deposits of the bank's customers, regulators rushed to look for potential buyers. However, an earlier auction attempt passed without a buyer, prompting the FDIC to extend the bidding process and allow separate offers for SVB subsidiaries to expand the pool of bidders.
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Lee Brooks
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