The Federal Deposit Insurance Corporation (FDIC) has sold Silicon Valley Bank (SVB) to First–Citizens Bank at a cost of $20 billion.
First Citizens took $56 billion in deposits, out of $119 billion, and $72 billion in loans for total assets of $110 billion.
The loans were sold at a steep discount of $16.5 billion with $90 billion in assets remaining at FDIC.
There was also a loss-share agreement whereby FDIC will share in the losses and potential recoveries on the loans.
“The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion,” the corporation said.
That amounts to not far from 20% of all insurance reserves at FDIC which are thought to amount to $125 billion.
$2.5 billion went for Signature bank which was sold earlier this month, with this extra $20 billion bringing their assets down to barely covering maybe two or three more bank failures.
FDIC’s entire insurance reserve has previously been depleted however, most recently in 2008 when it asked banks for a three year advanced premium while operating with a negative balance.
First Commercial was selected as the winner of a bidding process. They had $109 billion in assets prior to this acquisition, and are based in North Carolina.
“This transaction will accelerate our expansion in California and introduce wealth capabilities in the Northeast,” said Frank Holding, the chairman and CEO of First Citizens.
“SVB’s Private Wealth business is a natural fit for our high-touch and sophisticated level of high-net-worth customer service and approach.”
From the perspective of some Silicon Valley startups however, their deposits have gone from fully insured at FDIC, back to insured only up to $250,000.
Some therefore have questioned the timing for this sale, with others wondering what effect might have the overnight doubling of First Commercial’s assets.
Much of that may well depend on whether this banking crisis has calmed amid a significant sell-off in bank stocks this Friday.
But European stocks are slightly in the green for today as markets continue their volatility amid an uncertain new environment of high interest rates.
- SEO Powered Content & PR Distribution. Get Amplified Today.
- Platoblockchain. Web3 Metaverse Intelligence. Knowledge Amplified. Access Here.
- Source: https://www.trustnodes.com/2023/03/27/fdic-loses-20-billion-in-the-sale-of-silicon-valley-bank
