First Citizens Bank & Trust Co is set to acquire Silicon Valley Bank’s loans and deposits, according to the U.S. Federal Deposit Insurance Corporation (FDIC). The deal will involve the purchase of approximately $72 billion of SVB assets at a discount of $16.5 billion, while $90 billion in securities and other assets will remain under the control of the FDIC for disposition. In addition, the FDIC will have equity appreciation rights in First Citizens BancShares, Inc. with a potential value of up to $500 million.
The FDIC transferred all of SVB’s deposits and assets into a new “bridge bank” earlier this month to protect depositors of the collapsed lender. The 17 former branches of Silicon Valley Bridge Bank, National Association, will now open as First-Citizens Bank & Trust Company, following the deal’s conclusion. SVB’s customers are advised to continue using their current branches until notice is received from First-Citizens Bank & Trust Company that systems conversions have been completed to allow full-service banking at all other locations.
First Citizens Bank and the FDIC also entered into a “loss-share transaction” on the commercial loans purchased from the SVB bridge bank. The transaction is expected to keep assets in the private sector and minimize disruptions for loan customers. The FDIC noted that the estimated cost of SVB’s failure to its Deposit Insurance Fund would be around $20 billion, with the exact cost to be determined once the receivership is terminated.
SVB’s collapse has been cited as one of the catalysts for Credit Suisse’s eventual downfall and emergency rescue by domestic rival UBS. Nevertheless, analysts believe that the ensuing market volatility has been unwarranted given the “idiosyncratic” flaws that left banks like SVB and Credit Suisse exposed and caused a loss of investor confidence.
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