In a significant move following the largest US banking collapse since Lehman Brothers, North Carolina’s First Citizens Bank & Trust Co. has agreed to acquire Silicon Valley Bank’s (SVB) deposits and loans in their entirety.
According to an official press release from the FDIC, “today’s transaction included the purchase of about $72 billion of Silicon Valley Bridge Bank, National Association’s assets at a discount of $16.5 billion. Approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC. In addition, the FDIC received equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million.”
Today, we entered into an agreement with First-Citizens Bank & Trust Company to purchase and assume all deposits and loans of Silicon Valley Bridge Bank, N.A.https://t.co/vjDsnQxhrr pic.twitter.com/MI5lXN5y6r
— FDIC (@FDICgov) March 27, 2023
The estimated cost of SVB’s failure to the Deposit Insurance Fund is around $20 billion, with the final cost determined upon the termination of the receivership.
The high-profile collapse of SVB, a prominent player in the tech and venture capital sector, occurred on March 10, marking the largest US bank failure since the global financial crisis.
The downfall was triggered by clients withdrawing billions from their accounts and a dramatic drop in the value of previously considered safe assets, such as US Treasury bills and government-backed mortgage securities. This came in response to the Federal Reserve’s aggressive interest rate hikes. Struggling to meet clients’ withdrawal demands and fund new lending, the bank unsuccessfully attempted to raise $2.25 billion.
The collapse of SVB sent shockwaves through global banks and was identified as a catalyst for Credit Suisse’s eventual downfall and emergency rescue by domestic rival UBS.
Despite the ensuing market volatility, many analysts argue that the unique flaws that left SVB and Credit Suisse vulnerable were not indicative of a broader market issue. Nevertheless, the loss of investor confidence has undoubtedly had a considerable impact on the financial landscape.