Photo illustration, the logo of the Silicon Valley Bank is visible on a smartphone, with the stock market index in the background on the personal computer on March 14, 2023, in Rome, Italy.
Andrea Ronchini | Nurphoto | Getty Images
First Citizens Bank & Trust Co will buy Silicon Valley Bank’s deposits and loans, the U.S. Federal Deposit Insurance Corporation said Monday, just over two weeks after the biggest U.S. banking collapse since Lehman Brothers.
The deal includes the purchase of approximately $72 billion in SVB assets at a discount of $16.5 billion, but approximately $90 billion in securities and other assets remains “in receivership for disposal by the FDIC.”
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“In addition, the FDIC received equity valuation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million,” the FDIC said in a press release.
It comes after the regulator earlier this month transferred all deposits and assets from the SVB to a new “bridge bank” in an effort to protect depositors from the bankrupt lender.
“The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First-Citizens Bank & Trust Company on Monday, March 27, 2023,” the FDIC statement said Monday.
“Customers of Silicon Valley Bridge Bank, National Association should continue to use their current branch until they receive notification from First-Citizens Bank & Trust Company that system conversions have been completed to enable full-service banking at all of its other branches.”
First Citizens Bank and the FDIC also entered into a “loss-share transaction” – where the FDIC absorbs a portion of the loss on a given pool of assets – on the commercial loans purchased from the SVB bridge bank.
“The loss-share transaction is expected to maximize recovery of the assets by keeping them in the private sector. The transaction is also expected to minimize disruption to loan customers,” the FDIC explained.
The regulator added that the estimated cost of the SVB’s failure to its Deposit Insurance Fund (DIF) will be around $20 billion, with the exact cost to be determined once receivership has ended.
Regulators shut down SVB, a big name in the tech and venture capital industries, and took control of its deposits on March 10 in what was the largest U.S. bank failure since the global financial crisis.
The collapse came after the bank’s clients took billions from their accounts and the value of assets previously considered safe – such as U.S. Treasury bills and government-backed mortgages – fell dramatically in the face of the Federal Reserve’s aggressive rate hikes. .
This left the bank struggling as it attempted to raise $2.25 billion to meet customer borrowing needs and fund new loans.
As of March 10, the SVB bridge bank had about $167 billion in total assets and about $119 billion in total deposits, the FDIC confirmed.
The collapse of the SVB sent shockwaves through global banks and was cited as one of the catalysts for the Swiss giant Credit Switzerland‘s eventual demise and emergency rescue by domestic rival UBS.
However, many analysts believe the resulting market volatility is unwarranted given the “idiosyncratic” failings that exposed SVB and Credit Suisse, among others, and caused a loss in investor confidence.
– CNBC’s Jihye Lee contributed to this report
