According to the Federal Deposit Insurance Corporation (FDIC), troubled Silicon Valley Bank (SVB) was acquired by Raleigh, North Carolina-based First Citizens Bank & Trust Company. First Citizens acquired all of SVB’s deposits and loans, as well as the 17 branches that SVB owned in the United States.
Silicon Valley Bank bought by First Citizens in FDIC-brokered deal
The FDIC has Announced that First Citizens Bank has taken over Silicon Valley Bank (SVB) following Flagstar’s acquisition of Signature Bank seven days earlier. According to the FDIC, as of March 10, 2023, SVB had $167 billion in total assets and approximately $119 billion in total deposits. First Citizens Bank bought $72 billion in assets from SVB “at a discount of $16.5 billion,” the FDIC said. The federal deposit insurance agency also stated that “approximately $90 billion in securities and other assets will remain in receivership for disposal by the FDIC.”
As part of the settlement, the FDIC has obtained “capital appreciation rights in First Citizens Bancshares, Inc.” with a value limit of $500 million. Unlike the announcement regarding the Signature Bank acquisition, there is no mention of cryptocurrency-related content regarding the purchase of SVB. Prior to its acquisition by First Citizens, Valley National Bancorp had also expressed interest in buying the struggling California bank. First Citizens CEO Frank Holding Junior fixed that your firm remains committed to supporting venture capital (VC) firms.
“We are committed to building and preserving the strong relationships that SVB’s legacy global fund banking business has with private equity and venture capital firms,” the First Citizens CEO said in a statement.
Silicon Valley Bank one of the ‘costliest bank failures in US history’
The FDIC announced that, in addition to the SVB acquisition, it estimates that the “cost of Silicon Valley Bank’s failure to its Deposit Insurance Fund (DIF) will be approximately $20 billion.” Although the exact cost has yet to be determined, it will be known once the FDIC finalizes its receivership relationship. According to economics author Joey Politano, this estimate would make SVB one of the costliest failures in US history.
“FDIC estimates that the failure of Silicon Valley Bank will cost the deposit insurance fund $20 billion.” tweeted Politano. “This would make it the costliest bank failure in US history, surpassing the 2008 Indymac bankruptcy (which cost $12.4 billion) and eating up 14% of the insurance fund, which is financed through an evaluation of the banks”. Compared to Signature Bank’s estimated cost for the DIF of around $2.5 billion, SVB’s losses are significantly higher.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, explained in a note sent to Bitcoin.com News that the acquisition of SVB has given the banking sector a short break. However, there is a fear of worrisome unrealized losses the American banking system. “The development has provided a reprieve for the beleaguered banking sector in early trading, with Deutsche Bank, hit by such turmoil on Friday, rising more than 6%,” Streeter said. “In London, Barclays, Standard Chartered, HSBC and Lloyds all rose as confidence returned a little more.”
Streeter opines that the dispersal of parts of the failing bank to a new owner may give the recordulator more “ability to deal with issues that still threaten to arise elsewhere, particularly with regional US banks.” However, market analyst Hargreaves Lansdown says that “the big concern is that they are sitting on huge piles of unrealized losses, not only in their bond portfolios, but also in other assets that have been hit by the storm of the high interest rates.” Streeter added:
There are fears that commercial real estate could be the next weak link as debt matures in the coming years and will have to be refinanced in a market where rates have skyrocketed, while valuations have fallen, and there is much less money circulating .
What do you think about the acquisition of Silicon Valley Bank by First Citizens Bank and the estimated cost of $20 billion for the Deposit Insurance Fund? Share your thoughts on this topic in the comments section below.
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