On Monday, US regulators said they would back a deal to buy the assets of Silicon Valley Bank (SVB) from regional bank First Citizens Bank. At the same time, the Federal Deposit Insurance Corporation (FDIC) will lose about $20 billion on this deal.
Starting Monday, 17 former Silicon Valley Bank branches will operate under the banner “SVB, a division of First Citizens Bank,” and customers of the bankrupt bank will still have access to accounts through the website, mobile apps, and the branches.
First Citizens said it would take $110 billion in SVB assets, $56 billion in deposits and $72 billion in loans from its balance sheet under the deal.
First Citizens Bank will also receive an FDIC line of credit and an agreement with the FDIC to share some of its commercial loan losses.
The assets of First Citizens Bank itself before the deal were around $109 billion, and the total volume of deposits was $89.4 billion.
Recall that to save the stability of the US banking system, the FDIC acquired SVB on March 10 after its customers began to withdraw deposits from the bank massively. It also led to the bankruptcy of New York-based Signature Bank and a decline in the market value of several US regional banks.
The FDIC hopes the deal with First Citizens Bank will minimize damage to the deposit insurance fund. The FDIC does not use US taxpayers’ money, but is funded by fees from the entire banking industry.
According to the agreement, the new owner will not pay cash upfront for the purchase of SVB. Instead, First Citizens Bank granted FDIC rights to the capital gains amount of its stock, which could be worth up to $500 million — just a fraction of what Silicon Valley Bank was worth before. bankruptcy.
The FDIC may exercise these rights between March 27 and April 14. The amount of money she will have will depend on the value of First Citizens Bank shares. They jumped 50% to $874.75 in premarket trading on Monday.
The FDIC’s loss of about $20 billion will be on top of the $2.5 billion canceled by the FDIC following the sale of another bankrupt bank, Signature Bank of New York, which was sold a week ago to the New York Community Bank.
The failure of SVB, the 16th largest bank in the United States, was the nation’s largest bank failure since the 2008 financial crisis.
