Silicon Valley Bank (SVB), the US regional lender that was taken over by federal authorities following a run on its deposits earlier this month, has been bought by First Citizens Bank.
The Federal Deposit Insurance Corporation (FDIC) announced in a statement on its website on Monday morning that 17 former physical SVB branches will reopen as First Citizens branches after the North Carolina-based lender acquired roughly $72 billion (€66.95 billion) of the troubled bank’s assets at a discount of $16.5 billion.
The FDIC said that approximately $90 billion (€83.69 billion) in SVB securities and other assets will remain in federal receivership pending disposal by authorities.
It estimates that the final cost of SVB’s collapse to the FDIC will be around $20 billion (€18.6 billion).
“This has been a remarkable transaction in partnership with the FDIC that should instil confidence in the banking system,” Frank Holding Jr, chief executive of First Citizens, said in a statement. “This transaction leverages our solid foundation to add significant scale, geographic diversity, compelling digital capabilities and most importantly, meaningful solutions for customers throughout their life cycle.”
With assets of $209 billion at the end of 2022, SVB – an important lender to early-stage tech start-ups in California and also in Ireland through its partnership with the Ireland Strategic Investment Fund (ISIF) – became the biggest US bank to fail in more than 10 years earlier this month when, over the space of just two days, depositors began pulling their money from the bank amid panic after a failed equity raise.
Customers withdrew some $42 billion in one day as rumours about SVB’s future swirled on social media after it announced a $1.8 billion loss on the sale of securities and a slowdown in funding at the venture capital-backed firms it serves.
Shares in the bank plunged in trading, triggering worries about other US regional lenders and FDIC swooped in to take over its business.
But European regulators and politicians have criticised Washington’s handling of the SVB affair after a snap decision was made over the weekend of March 11th to guarantee all deposits at the bank. This was despite the fact that the average customer balance at SVB was $4.2 million (€3.9 million), well above the federal deposit insurance limit of $250,000.
FDIC then sought a buyer for SVB’s business with The Financial Times reporting that private equity investors including Blackstone, Apollo, Carlyle, Sixth Street and HPS Investment Partners were all in the mix at one stage.
Meanwhile, the bank’s UK unit - through which most of SVB’s Irish start-up customers did their business with the lender - was acquired by HSBC on March 13th. ISIF said last week that it is engaging with the British banking giant regarding future funding for Irish businesses.
Book-ended in the same week by the collapses of crypto lenders Silvergate and Signature Bank, the SVB debacle spread panic through global markets in March with attention quickly turning to troubled Swiss lender Credit Suisse. In a deal cobbled together by Swiss regulators last weekend, the bank was acquired by its across-the-street rival, Zurich-based UBS, at a significant discount of just over €3 billion.
Regulators on both sides of the Atlantic are hoping that the swift actions undertaken in recent weeks to stop the rot will restore confidence.