First Citi will purchase Silicon Valley Bank after the worst US bank bankruptcy since 2008
First Citizens will purchase much of Silicon Valley Bank, the tech-focused financial company that collapsed this month, kicking off a chain reaction that prompted a second bank to fail and questioned global banking trust.
SVB and Signature Bank depositors were guaranteed full access to their funds by the Federal Deposit Insurance Corp. and other authorities to prevent a larger financial catastrophe.
The FDIC said 17 former branches of Silicon Valley Bank will open as First Citizens Bank later today.
The Federal Deposit Insurance Corporation said in a statement that it estimated the failure would cost its deposit insurance fund about $20 billion. It will provide an exact figure for when the FDIC's settlement and intake ends.
There's a lot of money at stake here, but with depositors and trust continues to be fragile, it takes weeks to complete a deal, and each day that goes by is said to devalue assets by one. little.
The FDIC conducted two unsuccessful auction processes for the Silicon Valley Bridge Bank because they had to change what they were selling, including splitting assets.
This deal with First Citizens includes a purchase deposit and a loan, worth about $72 billion, at a discount of $16.5 billion.
The FDIC notes that as of March 10, the Silicon Valley Bridge Bank, the National Association, "has total assets of approximately $167 billion and total deposits of approximately $119 billion."
He also added that about $90 billion in securities and other assets will remain in escrow for the FDIC to handle.
Part of the agreement also grants the FDIC the "right to increase stock prices" in First Citizens BancShares, Inc., Raleigh, NC:
common stock with a potential value of up to $500 million.
Note that the $90 billion mentioned here are not the assets of Silicon Valley Bank Financial, which was the parent/parent company of SVB before its collapse.
The business was in a separate bankruptcy process and it essentially continued to operate during the FDIC takeover of the deposit and lending business, which was renamed Silicon Valley Bridge Bank. and partially sold today.
As part of the FDIC takeover, newly created bridging bank deposits are not subject to the typical legal $250,000 account limit, essentially providing depositors with protection. unlimited.
When asked if that would change, in a statement to TechCrunch, the FDIC said "deposits are insured up to $250,000 per depositor, per insured bank, per rights class." account owner."
The collapse of the Silicon Valley bank rocked the banking industry, especially the banks in the region, and prompted the FDIC to move all SVB deposits to a new "bridge bank" to depositor protection.
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Soon after, the Federal Reserve relieved the bank's depositors by ensuring that they were fully protected. Depositors have access to all their funds from March 13.
Before its collapse, Silicon Valley Bank was the 16th largest bank in the United States. Its abrupt collapse, temporarily leaving thousands of startup founders struggling to make ends meet and keep their businesses afloat, was the biggest bank collapse in the United States since the financial crisis main 2008.
Monday's deal follows a similar move at Signature Bank a week ago, which is being acquired by Flagstar.
In a memo sent to employees this morning, SVB Bridge Bank's CEO, Tim Mayopoulos, said "the announcement to follow the tender process has generated significant interest from some employees.".
He added: "This is a very positive outcome for SVBB. It allows the bank to remain unified in a way that delivers the most value to our customers." Mayopoulos will step down to be replaced by Frank B. Holding, Jr., president and CEO of First Citizens.
“First Citizens prides itself on organic growth and strategic acquisitions that build our core competencies in a deliberate and deliberate manner,” said Holding, Jr., president and CEO. of First Citizens, said in a statement.
Holding, Jr., whose grandfather founded a North Carolina-based lending company, has overseen nearly two dozen acquisitions since taking office in 2008. Last year, First Citizens bought CIT, the company The company lends money to mid-sized companies, for $2 billion.
He said the acquisition of Silicon Valley Bridge Bank will enhance First Bank's ability to serve companies in the private equity, venture capital and technology sectors.
“In particular, we are committed to strengthening and maintaining the strong relationships that SVB's previous Global Fund Banking business had with private equity and venture capital firms.
This pandemic will also accelerate our expansion into California and showcase the potential for wealth in the northeast. SVB's private wealth business aligns naturally with our sophisticated, premium customer service and approach,” he added.
The failure of Silicon Valley Bank exposed many weaknesses in the banking sector and led to scrutiny of
