The Federal Deposit Insurance Corporation (FDIC) announced that First Citizens Bank & Trust Co. will purchase Silicon Valley Bank (SVB) deposits and loans, just over two weeks after its collapse. Customers continue to wonder what will happen to their money, if they haven’t received it.
The agreement includes the purchase of approximately $72 billion of SVB assets at a discount of $16.5 billionbut about $90 billion in securities and other assets will remain “in Receivership for FDIC disposal.”
“In addition, the FDIC has received appreciation rights to common stock of First Citizens BancShares, Inc., Raleigh, North Carolina, with a potential value of up to $500 million,” the FDIC said in a statement.
With this movement, since last Monday March 27, the 17 former branches of Silicon Valley Bridge Bank, National Association, were to open as First Citizens Bank & Trust Companyas announced by the FDIC.
From the moment the SVB collapsed, the FDIC immediately took over all of the bank’s deposits and assets through a new “bridge bank,” to protect depositors from the failed lender.
In addition, the FDIC and First Citizens Bank entered into a “loss-sharing transaction” on the commercial loans purchased from bridge bank SVB. This means that the federal agency will absorb part of the losses of a certain set of assets..
“The loss-sharing transaction is expected to maximize recoveries on assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers,” the FDIC explained.
The regulator added that the estimated cost of SVB’s bankruptcy to its Deposit Insurance Fund will be around $20 billionand that the exact cost will be determined after the receivership is complete.
As for what refers to Silicon Valley Bank’s former clientsthe FDIC confirmed that “must continue to use their current branch until they receive notification from First-Citizens Bank & Trust Company that systems conversions have been completed to enable full-service banking at all of its other branches.”
The collapse of SVB is the largest bankruptcy of a US bank since the global financial crisis that ended the existence of Washington Mutual in 2008. Silicon Valley Bank was part of the list of the 20 largest banks in the United States.
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