First Citizens acquires failed Silicon Valley Bank

First Citizens has agreed to buy Silicon Valley Bank, the California lender that powered thousands of startups before its collapse sent shockwaves through the financial sector, the states Federal Deposit Insurance Corporation announced Monday. -United. The failure of Silicon Valley Bank is expected to result in a loss of about $20 billion for the Deposit Insurance Fund, the regulator said.

The deal includes the purchase of approximately $72 billion in assets from Silicon Valley Bank at a $16.5 billion discount. About $90 billion in securities and other assets of California-based lenders will remain “in escrow for disposal” by the FDIC.

The announcement comes weeks after the FDIC took over Silicon Valley Bank after a run on deposits rendered the lender insolvent. The 17 former branches of Silicon Valley Bank will open Monday as First Citizens Bank, the FDIC said.

The Silicon Valley bank’s collapse rocked the banking industry, especially regional banks, prompting the FDIC to transfer all SVB deposits to a new “bridging bank” to protect depositors. Soon after, the Federal Reserve relieved the lender’s depositors by ensuring they were fully protected. Depositors had access to all their money from March 13.

“In addition, the FDIC has received stock appreciation rights from First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million,” the FDIC said in a statement. a statement.

Prior to the collapse, Silicon Valley Bank was the 16th largest bank in the United States. was the largest U.S. bank failure since the 2008 financial crisis. Monday’s deal follows a similar move at Signature Bank a week ago, which is being acquired by Flagstar.

“First Citizens is proud of its organic growth and strategic acquisitions that build our core capabilities in a careful and deliberate way,” Frank B. Holding, Jr., First Citizens president and CEO, said in a statement.

Holding Jr, whose grandfather started the North Carolina-based lender, has overseen nearly two dozen acquisitions since taking office in 2008. Last year, First Citizens acquired CIT, a business lender of medium size, for 2 billion dollars.

The acquisition of Silicon Valley Bank will strengthen First Bank’s ability to serve companies in the private equity, venture capital and technology sectors, he said.

“Specifically, we are committed to developing and maintaining the strong relationships that SVB’s former Global Fund Banking business has with private equity and venture capital firms. This transaction will also accelerate our expansion into California and introduce wealth capabilities to the Northeast. SVB’s Private Wealth business is a natural complement to our high-end and sophisticated level of client service and approach,” he added.

The failure of Silicon Valley Bank exposed many of the banks’ weaknesses and led to scrutiny of Fed oversight. Even though Silicon Valley Bank was exceptionally vulnerable due to its business model – largely serving tech startups and venture capitalists who deposited tens of billions of dollars during the peak funding round in 2021 and have struggled to raise new capital since and quickly tap into their savings — its collapse has many calling for a change in the way lenders value their assets in financial statements.

The Bank of England said last week that it warned US regulators of Silicon Valley Bank’s growing risks long before it collapsed.