The US Federal Deposit and Insurance Corporation (FDIC) revealed on Monday that North Carolina-based First Citizens Bank will buy Silicon Valley Bank’s deposits and loans.
The former 17 branches of the collapsed bank opened as First Citizens Bank and Trust Company on Monday, and customers have been automatically transferred with their deposits, the FDIC confirmed.
Under the terms of the deal, First Citizens Bank & Trust Co will buy $72 billion of SVB’s assets at a $16.5 billion discount. Th remaining $90 billion in securities and other assets will remain in FDIC’s receivership. The regulator received equity appreciation rights in First Citizens BancShares, Inc., with a potential value of up to $500 million.
Following the closure of SVB, FDIC established Silicon Valley Bridge Bank and transferred all the failed bank’s deposits and assets there in order to stabilise the institution.
FDIC and First-Citizens Bank & Trust Company also agreed on a “loss-share transaction” for commercial loans that were acquired from the former Silicon Valley Bridge Bank. Under this agreement, any losses or recoveries on loans covered by the loss-share agreement will be shared between the two parties. The purpose of this arrangement is to ensure that asset recoveries are maximized by keeping them in the private sector, avoid any disruption for loan customers, and enable First-Citizens Bank & Trust Company to take on all loan-related Qualified Financial Contracts.
The regulator stated that once the receivership is terminated, the exact cost of Silicon Valley Bridge Bank’s failure to its Deposit Insurance Fund will be determined, but it is estimated to be approximately $20 billion.
Last week, Germany’s BaFin allowed SVB to resume business operations through its local subsidiary.
SVB’s situation seems to be becoming more stable now but its collapse triggered a market instability and caused major investor concerns. Swiss lender Credit Suisse fell victim to the market turmoil and was subsequently acquired by UBS for worth CHF 3 billion.
