The FDIC, or Federal Deposit Insurance Corporation, said in a statement on Monday that First Citizens Bank and Trust Co is set to buy all loans and deposits of SVB or Silicon Valley Bank.
The FDIC said it had made a purchase and assumption agreement. This is for all loans and deposits of SVB or Silicon Valley Bridge Bank, National Association, by First Citizens Bank and Trust Company.
The FDIC said in a press release that Silicon Valley Bridge Bank, National Association’s seventeen previous branches, shall open as First Citizens Bank and Trust Company on Monday, March 27, 2023.
SVB customers will continue to use their current branch. Then, they will receive notice from First Citizens Bank that the systems conversions are complete to allow full-service banking at all other branch locations.
Depositors of SVB shall automatically become the depositors of First Citizens Bank. The FDIC shall continue to insure all deposits assumed by the First Citizens Bank until the insurance limit.
Till March 10, SVB had about $ 167 billion in total assets and about $ 119 billion in total deposits. The FDIC added that the transactions included purchasing about $ 72 billion of Silicon Valley Bridge Bank, National Association’s assets at a discount of $ 16.5 billion.
So, about $ 90 billion in securities and assets shall remain in the receivership for disposition by the FDIC. Also, the FDIC had received equity appreciation rights in the First Citizens BancShares, Inc. common stock with a potential value of about $ 500 million.
Impact on the Banking Crisis
CNN Business reported that First Citizens Bank has purchased some remaining assets, loans, and deposits of SVB. SVB failed this year and kicked off the banking crisis.
The investors were relieved after hearing that the remnants of Silicon Valley Bank finally found a strong home. And they expect the crisis to ease.
Shares of First Citizens Bank went up to more than 47 percent in the morning trading. This wiped out the losses First Citizens Bank’s stock suffered since SVB’s collapse. Moreover, this brought its shares to their highest point since November 2022. Also, the other bank stocks rose in morning trading.
The KBW Nasdaq Bank Index had lost more than 20 percent from the start of the banking crisis. It was up 4 percent in early trading on Monday. This was before moderating to a 2 percent gain later in the morning.
Silicon Valley Bank customers can now continue using their present branch. This is until they hear further from First Citizens Bank.
The FDIC said that First Citizens Bank would buy the $ 72 billion in Silicon Valley Bank loans for about $ 55 billion.
The regulator said that the FDIC estimated the cost of the failure of SVB to its Deposit Insurance Fund could be about $ 20 billion. The exact cost can be calculated when the FDIC will terminate the receivership.
The collapse of Signature Bank followed the collapse of Silicon Valley Bank. The failures of the banks triggered a collapse in confidence among investors and depositors in other vulnerable banks.
On the other hand, UBS rescued its rival Credit Suisse Bank a week ago in an emergency takeover led by the Swiss government.