First Citizen Acquires Troubled Silicon Valley Bank At A Discount of 16.5 Billion USD

The troubled Silicon Valley Bank (SVB) will be acquired by First Citizens for worth 500 million USD with FDIC. SVB, a tech-focused financial institution collapsed this month, and it set off a chain reaction leading to failure in second bank as well, shaking the faith of global banking sector.

Silicon Valley, located at Santa Clara, California, collapsed on March 10 in a bank run after customers rushed to withdraw money due to fears over the bank's solvency.

The Federal Deposit Insurance Corp(FDIC). and other regulators did take steps in order to avoid wider banking crisis and guaranteed depositors in SVB and failed Signature Bank that they could still access their funds.

First-Citizens Bank and Trust Co will acquire all the deposit, loans and 17 branches of SVB, through the sale deal. More than half of Silicon Valley's assets will remain in US receivership. First Citizens Bank was founded in 1898 and says it has more than USD 100 billion in total assets, with more than 500 branches in 21 states as well as a nationwide bank. It reported net profit of USD 243 million in the last quarter. It is one of the top 20 US banks and it is the largest family-controlled bank in the country.

In the acquisition the FDIC has given its shares to First Citizens valuing 500 million dollars. Both the entities, FDIC and First Citizens will share the losses and the potential recovery on loans included under a loss-share agreement.

A week ago, New York Community Bank had agreed to buy a significant chunk of Signature Bank for 2.7 billion USD, but it did not materialise. On late Sunday, there were ongoing talks with First Citizens to make the acquisition deal, at least initially, seemed to achieve what regulators were looking for: a shoring up of trust in US regional banks.

FDIC would retain about USD 90 billion of Silicon Valley Bank's USD 167 billion in total assets, as of March 10, while First Citizens will acquire USD 72 billion at a discount of USD 16.5 billion, the FDIC said.

With inputs from PTI, it is noted that FDIC said that it estimates Silicon Valley Bank's failure will cost its industry-funded Deposit Insurance Fund of about 20 billion USD. It was the second-largest bank collapse in US history after the 2008 failure of Washington Mutual.