Bankrupt Silicon Valley bank sold to First Citizens
First Citizens Bank & Trust, based in North Carolina, announced on Monday that it has agreed to buy all loans and deposits from Silicon Valley Bank (SVB), based in California.
A First Citizens statement said it would purchase “all loans and certain other assets and assume all customer deposits and other liabilities of Silicon Valley Bridge Bank”.
“The transaction,” the bank said, “is structured as a complete bank purchase with loss-of-interest coverage.”
Silicon Valley Bridge Bank was created by US banking authorities after the collapse of SVB on March 10th.
News of the sale became public late on Sunday when the Federal Deposit Insurance Corporation (FDIC), a US government deposit insurer, announced its approval of the proposed sale.
The FDIC said SVB depositors “would automatically become First Citizens Bank depositors”, noting that the sale would cover $119 billion (€110.5 billion) in deposits and $72 billion (€66.8 billion) in active.
First Citizens said all 17 SVB branches would open on Monday as “Silicon Valley Bank, a division of First Citizens Bank”.
Why was the SVB collapse significant?
SVB, a tech startup bank founded in the 1980s, has collapsed after a rush by depositors over worries about its future. It was the 16th largest bank in the United States.
The demise of SVB sent shockwaves through the global banking sector, which saw further collapses and takeovers, most notably the emergency takeover of Credit Suisse by rival UBS on March 19 and a sharp drop in the value of Deutsche Bank shares on Friday. .
The SVB collapse was the second largest in US history and the largest since the 2008 financial crisis.
Its implosion caused the FDIC, the US Treasury and the US Federal Reserve to take action to ensure that SVB depositors could access their money. The Fed also decided to create a new bank lending tool in an effort to avoid similar rapid meltdowns in the future.
As part of the sale, the FDIC will provide First Citizens with a new line of credit to ensure liquidity, as well as an arrangement that will allow the bank to share losses with the insurer.
In a statement, the FDIC said it “estimates the cost of the Bank of Silicon Valley’s failure to its Deposit Insurance Fund (DIF) to be approximately $20 billion.” The exact cost, he said, “will be determined when the FDIC closes receivership.”
First Citizens has approximately $109 billion in assets and total deposits valued at $89.4 billion.
Source: DW
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