According to the Federal Deposit Insurance Corporation (FDIC), troubled bank Silicon Valley Bank (SVB) has been acquired by First Citizens Bank&&a trust company headquartered in Raleigh, North Carolina. First Citizens acquired all deposits and loans from SVB, as well as 17 branches that SVB owned throughout the United States.
Silicon Valley Bank was acquired by First Citizens through FDIC intermediaries
The FDIC announcedFirst Citizens Bank’s acquisition of Silicon Valley Bank (SVB), following Flagstar’s acquisition of Signature Bank seven days earlieras of March 10, 2023, according to the FDIC, SVB had total assets of $167 billion and total deposits of approximately $119 billion; First Citizens Bank purchased $72 billion worth of SVB assets “at a discount of $16.5 billion,” the FDIC said. The FDIC also stated that “approximately $90 billion in securities and other assets will remain in receivership for disposition by the FDIC.”
As part of the transaction, the FDIC received a value cap of $500 million in “equity valuation rights in First Citizens Bancshares, Inc. “Unlike the announcement regarding the Signature Bank acquisition, no cryptocurrency-related Prior to First Citizens’ acquisition, Valley National Bancorp had also expressed interest in acquiring the struggling California bank.said the company iscommitted to continuing to support venture capital (VC) firms.
First Citizens’ CEO said in a statement that the company is “committed to building and maintaining the strong relationships with private equity and venture capital firms that Legacy SVB’s global fund banking business has.”
Silicon Valley Bank is one of the “costliest bank failures in U.S. history”
The FDIC announced that in addition to the SVB acquisition, it estimates that “the Deposit Insurance Fund (DIF) cost of the Silicon Valley Bank failure is approximately $20 billion.” The exact cost has not yet been determined, but will be known once the FDIC terminates the receivership. According to economist Joey Politano, this estimate would make SVB one of the most expensive bankruptcies in U.S. history.
“FDIC estimates Silicon Valley Bank failure would cost $200B in deposit insurance funds”and tweetedPolitano “This would be the costliest bank failure in U.S. history, surpassing IndyMac’s 2008 failure (which cost $12.4B) and consuming 14% of the insurance fund, which is funded by a levy on banks.” Signature Bank’s estimated cost to the DIF is about $2.5B and compared to SVB’s losses are significantly greater.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, explained in a note sent to Bitcoin.com News that the SVB acquisition gave the banking sector a brief break. However, there are fears ofunrealized lossesplaguing the U.S. banking system.” Streeter said, “This development brought some respite to the beleaguered banking sector in early trading, with Deutsche Bank surging more than 6% on Friday after being hit by such turmoil.
“In London, Barclays, Standard Chartered, HSBC, and Lloyds all gained a bit of confidence and moved higher.
Streeter believes that diversifying some of the failed banks to new owners may enhance regulators’ “ability to deal with problems that may still occur elsewhere, especially in the U.S. local banks.” But, says a market analyst at Hargreaves Lansdown, “the big worry is that we have a big pile of unrealized losses, not only in our bond portfolio but also in other assets that have been hit by the high interest rate storm.” Streeter added:
The commercial real estate sector is feared to be the next weak spot as debt matures over the next few years and valuations decline while interest rates soar, requiring refinancing in a market that has seen a slow flow of capital.
What do you think about First Citizens Bank’s acquisition of Silicon Valley Bank and its estimated $20 billion burden on the deposit insurance fund? Share your thoughts on this subject in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, EchoVisuals / Shutterstock.com.
