First Citizens BancShares Inc. has agreed to acquire crisis-hit Silicon Valley Bank, days after it was taken over by authorities. The Federal Deposit Insurance Corporation said that the bank with headquarters in Raleigh, North Carolina, agreed to a purchase and assumption agreement for all of SVB’s deposits and loans. At a discount of $16.5 billion, the acquisition also entails the purchase of assets worth around $72 billion from Silicon Valley Bank.
The Federal institution also received equity appreciation rights in First Citizens worth up to $500 million, and around $90 billion in securities and other assets would remain in the receivership for the FDIC to dispose of. The statement claims that the failure will have cost the Deposit Insurance Fund roughly $20 billion, however, the precise amount won’t be known until the receivership is through.
Frank Holding Jr., chief executive officer of First Citizens, in a statement explained, “this has been a remarkable transaction in partnership with the FDIC that should instill confidence in the banking system.”
Last month, Silicon Valley Bank unexpectedly became the biggest US lender to collapse since the 2008 financial crisis. In a time of rising interest rates, the bank suffered a significant loss on the sale of its assets, which alarmed investors and depositors, who quickly started withdrawing their funds. An estimated $42 billion in withdrawal requests were made by investors and depositors in 24 hours.
In an effort to protect the uninsured savings of the bank’s starting clients, regulators had been rushing to secure a transaction for all or portions of the bank, but an earlier auction
the attempt failed to find a buyer. After receiving “substantial interest” from numerous potential buyers, the FDIC then extended the bidding process. To simplify the process and expand the pool of bidders, the FDIC allowed parties to submit separate offers for the Silicon Valley Private Bank subsidiary and Silicon Valley Bridge Bank NA – the firm created by the FDIC after SVB went into receivership.
After the bank’s failure, US authorities took unprecedented steps to restore faith in the financial system, providing a new bank guarantee that Federal Reserve officials claimed was large enough to safeguard all accounts in the country.
