First Citizens purchases embattled Silicon Valley Bank after collapse 

North Carolina-based lender First Citizens Bank and Trust Company has agreed to buy the embattled Silicon Valley Bank (SVB) which was seized by the US authorities. First Citizens BancShares entered into a loss-share transaction for all deposits and loans of the SVB, a statement from the US Federal Deposit Insurance Corporation (FDIC) read. 

As per this agreement, the FDIC and First Citizens BancShares will share losses and potential recoveries on the loans covered. This transaction aims to maximise recoveries on assets by keeping them in the private sector. It is also expected to minimise disruptions for loan customers. 

The FDIC statement further said, “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. Approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC.” The FDIC also received equity appreciation rights in First Citizens BancShares common stock with a potential value of up to $500 million.

It further mentioned, “The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First Citizens Bank & Trust Company on Monday, March 27, 2023.” SVB customers have been advised to continue availing the bank’s services from their current branch till they receive any notice from First Citizens BancShares regarding the completion of systems conversions. 

Depositors of the embattled SVB will automatically become depositors of First Citizens BancShares. The FDIC statement underlined that all the deposits assumed by the First Citizens BancShares will be insured by the FDIC. The statement read, “All deposits assumed by First Citizens BancShares and Trust Company will continue to be insured by the FDIC up to the insurance limit.”

At present, the estimated cost of Silicon Valley Bank’s collapse to its deposit insurance fund (DIF) is around $20 billion. The SVB had around $167 billion in total assets and about $119 billion in total deposits. 

Also read: SBI expects RBI to pause repo rate in April policy; continue withdrawal of accommodation

Also read: SVB fallout: JPMorgan Chase, US neobanks record maximum new account openings by start-ups