On March 10, the Federal Deposit Insurance Corporation took control of Silicon Valley Bank after a run on deposits rendered the bank unable to meet its financial obligations. After the announcement of the transaction late on Sunday night, the FDIC has been trying to find a buyer for the bank, either for the institution as a whole or for certain parts of it.
When the federal government acquired control of Silicon Valley Bank, it was the sixteenth-largest bank in the nation. Its demise was the greatest bank failure to occur in the United States during the financial crisis that occurred in 2008.
The acquisition of around $72 billion worth of assets was included in the agreement for the bank, which was renamed Silicon Valley Bridge Bank when the FDIC took control of it. This purchase was made at a discount of $16.5 billion. Not mentioned was an additional $90 billion worth of assets, including securities and other assets.
The authority that oversees banks will be granted equity appreciation rights in the shares of First Citizens, which may be worth as much as $500 million. The Federal Deposit Insurance Corporation anticipated that the collapse of the bank would result in a cost of around $20 billion to the government’s deposit insurance fund.
On Monday, the bank’s 17 previous locations in California and Massachusetts will reopen as First Citizens branches under the First Citizens banner. First Citizens Bank will treat its depositors as clients as soon as they open an account with the bank.
On March 17, the former parent company of Silicon Valley Bank, known as SVB Financial, filed for bankruptcy protection. It intends to conduct a procedure that is distinct from the sale of individual components, such as the investment manager SVB Capital and the brokerage business SVB Securities.
The failure of Silicon Valley Bank sent shock waves across the whole of the international banking system.
A week after the FDIC took control of the bank’s activities, New York Community Bancorp completed the purchase of the defunct Signature Bank on March 19th. This particular transaction included the acquisition of around $38 billion in assets, including $12.9 billion in loans, at a discount of $2.7 billion.
At around the same time, Switzerland’s biggest bank, UBS, agreed to purchase its troubled smaller competitor Credit Suisse for approximately $3.2 billion in a transaction that was quickly negotiated by the Swiss government. Investors soon lost trust in Credit Suisse, which had been plagued for years by scandals and mismanagement. The markets were spooked by Silicon Valley Bank, which caused investors to lose faith in Credit Suisse.
Banking authorities from across the globe have responded quickly in order to restore customers’ faith in the system. The Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank have all said that they intend to collaborate in an effort to expand access to funding denominated in U.S. dollars. In addition, the Federal Reserve established an emergency loan programme in order to assist in providing further assistance to financial institutions.
First Citizens, whose headquarters are located in Raleigh, North Carolina, claims to have more than one hundred billion dollars in assets and over five hundred branches located in twenty-two different states. It has seen tremendous expansion over the last several years, mostly as a result of its purchase of government-owned community banks. Depending on the level of help the government provides as part of the arrangement, transactions of this kind may result in substantial financial gains.