Silicon Valley Bank acquired by First Citizens
NEW YORK (AP) — First Citizens will acquire a large chunk of Silicon Valley Bank, the tech-focused financial institution that collapsed this month, setting off a chain reaction that caused the bankruptcy of a second bank and tested confidence in the global banking industry.
The Federal Deposit Insurance Corp. and other regulators had already taken extraordinary steps to avert a wider banking crisis by ensuring that depositors at the bankrupt SVB and Signature Bank would be able to access all their money.
While more than half of Silicon Valley’s assets will remain in receivership in the United States, the First Citizens deal announced Sunday night, at least initially, seemed to achieve what regulators were looking for: boosting confidence in banks. American regions.
At the opening bell on Monday, shares of mid-sized banks like Keycorp, Zions and First Horizon were up 8%. First Republic Bank, which received a $30 billion bailout from 11 of the nation’s biggest banks as it faltered in the wake of the Silicon Valley meltdown, jumped 23%.
SVB customers will automatically become customers of First Citizens, headquartered in Raleigh, North Carolina. The 17 former SVB branches will open Monday as First Citizens branches, the FDIC said.
European shares opened higher on Monday, with German lender Commerzbank AG up 2.4% and BNP Paribas up 1.2%. Concern over contagion in the banking sector quickly spread across Europe this month, and regulators there negotiated a UBS takeover of struggling Swiss bank Credit Suisse.
Shares of Deutsche Bank fell 8.5% on Friday for similar reasons, as interest rates rose, but shares of the German bank rebounded 3.6% on Monday.
Silicon Valley, based in Santa Clara, Calif., collapsed on March 10 in a bank run after customers rushed to withdraw cash due to fears over the bank’s solvency. It was the second-largest banking meltdown in U.S. history after the 2008 bankruptcy of Washington Mutual. Two days later Signature Bank of New York was seized by regulators as part of the third largest bank failure in the United States.
In both cases, the government agreed to cover deposits, even those that exceeded the federally insured limit of $250,000, so that depositors could access their money.
New York Community Bank agreed to buy a sizable share of Signature Bank in a $2.7 billion deal a week ago, but finding a buyer for SVB has taken longer .
The sale of Silicon Valley Bank involves the sale of all of SVB’s deposits and loans to First-Citizens Bank and Trust Co., the FDIC said.
The acquisition gives the FDIC’s stake in First Citizens a value of $500 million. The FDIC and First Citizens will share losses and potential recovery of loans included in a loss-sharing agreement, the FDIC said.
The FDIC will retain about $90 billion of Silicon Valley Bank’s $167 billion in total assets, as of March 10, while First Citizens will acquire $72 billion at a discount of $16.5 billion, said the FDIC. He said he estimated Silicon Valley Bank’s failure would cost his industry-funded deposit insurance fund about $20 billion.
First Citizens Bank was founded in 1898 and claims to have total assets of over $100 billion, with over 500 branches in 21 states as well as a national bank. It reported net income of $243 million last quarter. It is among the top 20 US banks and claims to be the largest family-owned bank in the country.
(BuzzFeed, HuffPost’s parent company, did business with SVB.)