First Citizens Bank & Trust Co will buy Silicon Valley Bank’s deposits and loans, the US Federal Deposit Insurance Corporation said Monday, just over two weeks after the biggest US banking collapse since Lehman Brothers .
The deal includes the purchase of approximately $72 billion in assets from SVB at a discount of $16.5 billion, but around $90 billion in securities and other assets will remain «in receivership for disposition by the FDIC».
“In addition, the FDIC has received capital appreciation rights in common stock of First Citizens BancShares, Inc., Raleigh, North Carolina, with a potential value of up to $500 million,” the FDIC said in a statement.
It comes after the regulator transferred all of SVB’s deposits and assets to a new «bridge bank» earlier this month in an effort to protect depositors from the failed lender.
“The former 17 branches of Silicon Valley Bridge Bank, National Association, will open as First–Citizens Bank & Trust Company on Monday, March 27, 2023,” the FDIC statement said Monday.
“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First–Citizens Bank & Trust Company that system conversions have been completed to enable full banking at all of their other branches. ”
First Citizens Bank and the FDIC also entered into a «loss-sharing transaction,» in which the FDIC absorbs part of the loss on a particular pool of assets, on business loans purchased from the SVB bridge bank.
“The shared loss transaction is projected to maximize the recovery of the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers,» the FDIC explained.
The regulator added that the estimated cost of SVB’s bankruptcy for its Deposit Insurance Fund will be around $20 billion, with the exact cost to be determined once the receivership is finished.
Regulators shuttered SVB, a big name in the technology and venture capital sector, and seized control of its deposits on March 10 in what was the biggest failure of a US bank since the global financial crisis.
The collapse came after the bank’s clientele withdrew billions from their accounts and the value of assets previously considered safe, such as US Treasury bills and government-backed mortgage securities, fell. drastically in the face of aggressive interest rate hikes by the Federal Reserve.
This left the bank reeling as it tried to raise $2.25 billion to meet clients’ withdrawal needs and finance new loans.
As of March 10, bridge bank SVB had about $167 billion in total assets and about $119 billion in total deposits, the FDIC confirmed.
SVB’s collapse sent shockwaves through global banks and was cited as one of the catalysts for the eventual collapse and emergency bailout of Swiss giant Credit Suisse by local rival UBS.
However, many analysts believe the resulting market volatility has been unwarranted given «idiosyncratic» failures that left SVB and Credit Suisse exposed and caused a loss of investor confidence.
Jihye Lee, CNBC contributed.