First Citizens Bank Acquires Silicon Valley Bank, Costing FDIC Deposit Insurance Fund an Estimated $20B

According to the Federal Deposit Insurance Corporation (FDIC), the troubled slope Silicon Valley Bank (SVB) was acquired by First Citizens Bank & Trust Company, which is based successful Raleigh, North Carolina. First Citizens acquired each deposits and loans from SVB, arsenic good arsenic the 17 branches that SVB owned crossed the United States.

Silicon Valley Bank Purchased by First Citizens successful FDIC-Mediated Deal

The FDIC has announced that First Citizens Bank has taken implicit Silicon Valley Bank (SVB) pursuing the acquisition of Signature Bank by Flagstar 7 days prior. According to the FDIC, arsenic of March 10, 2023, SVB had $167 cardinal successful full assets and astir $119 cardinal successful full deposits. First Citizens Bank purchased $72 cardinal worthy of SVB’s assets “at a discount of $16.5 billion,” the FDIC said. The national deposit security entity besides stated that “approximately $90 cardinal successful securities and different assets volition stay successful receivership for disposition by the FDIC.”

As portion of the deal, the FDIC has obtained “equity appreciation rights successful First Citizens Bancshares, Inc.” with a worth headdress of $500 million. Unlike the announcement regarding the acquisition of Signature Bank, determination is nary notation of cryptocurrency-related contented successful respect to the acquisition of SVB. Prior to its acquisition by First Citizens, Valley National Bancorp had besides expressed involvement successful purchasing the struggling California bank. First Citizens’ CEO, Frank Holding Junior, stated that his institution remains committed to supporting task superior (VC) firms.

“We are committed to gathering connected and preserving the beardown relationships that bequest SVB’s planetary money banking concern has with backstage equity and task superior firms,” the First Citizens’ CEO said successful a statement.

Silicon Valley Bank One of the ‘Costliest Bank Failures successful U.S. History’

The FDIC announced that, successful summation to the acquisition of SVB, it estimates the “cost of the nonaccomplishment of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to beryllium astir $20 billion.” Although the nonstop outgo is yet to beryllium determined, it volition beryllium known erstwhile the FDIC ends its receivership relationship. According to economics writer Joey Politano, this estimation would marque SVB 1 of the astir costly failures successful U.S. history.

“FDIC estimates that the nonaccomplishment of Silicon Valley Bank volition outgo the deposit security money $20B,” tweeted Politano. “This would marque it the costliest slope nonaccomplishment successful U.S. history, surpassing Indymac’s ’08 nonaccomplishment (which outgo $12.4B) and consuming 14% of the security fund, which is financed done an appraisal connected banks.” Compared to Signature Bank’s estimated outgo to the DIF of astir $2.5 billion, SVB’s losses are importantly greater.

Susannah Streeter, caput of wealth and markets astatine Hargreaves Lansdown, explained successful a enactment sent to Bitcoin.com News that the SVB acquisition has fixed the banking assemblage a little intermission. However, determination is fearfulness of unrealized losses troubling the U.S. banking system. “The improvement has brought immoderate respite to the beleaguered banking assemblage successful aboriginal trade, with Deutsche Bank, deed by specified turmoil connected Friday, surging by much than 6%,” Streeter said. “In London, Barclays, Standard Chartered, HSBC, and Lloyds each moved higher arsenic a spot much assurance returned.”

Streeter opines that dispersing parts of the failed slope to a caller proprietor whitethorn springiness the regulator much “capacity to woody with problems inactive threatening to popular up elsewhere, peculiarly with U.S. determination banks.” However, the Hargreaves Lansdown marketplace expert says, “the large interest is that they are sitting connected large piles of unrealised losses, not conscionable successful their enslaved portfolios, but connected different assets which person been battered by the tempest of high-interest rates.” Streeter added:

It’s feared that the commercialized existent property assemblage could beryllium the adjacent weakest nexus arsenic indebtedness matures implicit the adjacent fewer years and volition request to beryllium refinanced successful a marketplace wherever rates person soared, portion valuations person fallen, and determination is simply a batch little wealth sloshing around.

What bash you deliberation astir the acquisition of Silicon Valley Bank by First Citizens Bank and the estimated $20 cardinal outgo to the Deposit Insurance Fund? Share your thoughts astir this taxable successful the comments conception below.

Image Credits: Shutterstock, Pixabay, Wiki Commons, EchoVisuals / Shutterstock.com

Disclaimer: This nonfiction is for informational purposes only. It is not a nonstop connection oregon solicitation of an connection to bargain oregon sell, oregon a proposal oregon endorsement of immoderate products, services, oregon companies. Bitcoin.com does not supply investment, tax, legal, oregon accounting advice. Neither the institution nor the writer is responsible, straight oregon indirectly, for immoderate harm oregon nonaccomplishment caused oregon alleged to beryllium caused by oregon successful transportation with the usage of oregon reliance connected immoderate content, goods oregon services mentioned successful this article.