North Carolina-based First Citizens Bank will buy the collapsed Silicon Valley Bank, the US Federal Deposit Insurance Corporation (FDIC) has said. As per the deal reached by the banks, the Raleigh-based bank will take over most of the loan book and the deposits of the collapsed Silicon Valley Bank.
The FDIC also said $90 billion worth of securities and other assets of SVB will remain in the receivership by the FDIC.
"The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First-Citizens Bank & Trust Company on Monday, March 27, 2023," the FDIC said in a statement.
"Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First-Citizens Bank & Trust Company that systems conversions have been completed to allow full-service banking at all of its other branch locations," the statement added, according to IANS.
Under the deal, the depositors in SVB will automatically become depositors of First-Citizens Bank & Trust Company. Also, all the deposits will be insured by First-Citizens Bank & Trust Company.
"As of March 10, 2023, Silicon Valley Bridge Bank, National Association, had approximately $167 billion in total assets and about $119 billion in total deposits. Today's transaction included the purchase of about $72 billion of Silicon Valley Bridge Bank, National Association's assets at a discount of $16.5 billion," the FDIC said.
Silicon Valley Bank was shut down by California regulators earlier this month, marking the biggest bank failure since 2008 in the United States. The stunning development came after SVB Financial Group's shares tanked more than 60 percent following a botched bid to raise capital.
The problems started when SVB revealed that it had sold securities at a loss and that it was selling $2.25 billion worth of shares to improve the balance sheet. This created a panic on the markets and companies that had deposited large sums in the bank queued up for withdrawals.
The tech-focused bank was ranked as the 16th biggest lender in the US at the end of 2022 and had more than $210 billion in assets.
Last week, a research report published by the Social Science Research Network said as many as 186 American banks are at risk due to the erosion of the value of their assets in the wake of the aggressive rate hikes by the US Federal Reserve.
The asset value erosion at Silicon Valley Bank (SVB) triggered a spate of withdrawals from uninsured depositors of the bank, which in turn created a bank run and eventual collapse of the 16th largest bank in the US. The analysis by the Social Science Research Network shows that a frighteningly large number of American banks have dangerous levels of uninsured deposits.
Another report published last week said the unrealized losses at American banks are too high for comfort, though the cumulative measures taken by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Treasury have instilled confidence in the investors. The academic report says that unrealized losses at US banks were at $1.7 trillion at the end of 2022 and that this amount almost equals the banks' total equity of $2.1 trillion.