First Citizens Bank & Trust Co will purchase deposits and loans from Silicon Valley Bank, the US Federal Deposit Insurance Corporation announced Monday. America’s largest bank collapse ever since Lehman Brothers.
The transaction includes the purchase of approximately $72 billion of SVB assets at a discounted price of $16.5 billion, while approximately $90 billion of securities and other assets are “placed in custody for disposal by the FDIC.” Remains in person.
“In addition, the FDIC acquired stock appreciation rights with a potential value of up to $500 million in the common stock of First Citizens BankShares, Inc. of Raleigh, North Carolina,” the FDIC said in a release.
This comes after regulators moved all SVB deposits and assets to a new ‘bridge bank’ earlier this month to protect bankrupt lenders’ depositors.
“The former 17 branches of the Silicon Valley Bridge Bank, The National Association, will open as First Citizens Bank and Trust Company on Monday, March 27, 2023,” the FDIC said in a statement.
“Customers of the National Association of Silicon Valley Bridge Bank will remain in their current branches until they receive notification from First-Citizens Bank & Trust Company that the conversion of their systems to all other branches has been completed to enable full-service banking. should continue to be used.”
First Citizens Bank and the FDIC have also entered into a “loss sharing agreement” under which the FDIC will absorb a portion of the losses of a specified pool of assets on commercial loans purchased from SVB Bridge Bank.
“The loss-share transaction is projected to maximize asset recovery by keeping assets in the private sector. The transaction is also expected to minimize disruption to loan customers,” the FDIC said. explained.
The regulator added that the estimated cost to the SVB of failing the deposit insurance fund would be about $20 billion, with the exact cost to be determined after the receivership is terminated.
Regulators shut down SVB, a giant in the technology and venture capital sector, and took control of its deposits on March 10. This was the largest US bank failure since the global financial crisis.
The collapse has seen bank customers withdrawing billions of dollars from their accounts and the value of assets previously considered safe, such as U.S. Treasury bills and government-backed mortgage-backed securities, have been eroded by the Federal Reserve’s aggressive It happened after it fell dramatically in the face of a further rate hike.
This left banks struggling to raise $2.25 billion to meet their customers’ withdrawal needs and fund new loans.
As of March 10, the SVB Bridge Bank had total assets of approximately $167 billion and total deposits of approximately $119 billion, as confirmed by the FDIC.
However, many analysts believe the ensuing market volatility was unwarranted given the “peculiar” flaws that have exposed the likes of SVB and Credit Suisse, causing them to lose investor confidence.
Jihye Lee, CNBC contributed.
https://www.nbcnews.com/business/business-news/first-citizens-bank-buy-silicon-valley-bank-deposits-loans-rcna76758 First Citizens Bank to Buy Silicon Valley Bank Deposits and Loans