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First Citizens Bank Buys Assets Of Silicon Valley Bank, Says FDIC As per the reports suggest, the depositors of Silicon Valley Bridge Bank, National Association will automatically become the depositors of First Citizen & Trust Company

By Teena Jose

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US regulator the Federal Deposit Insurance Corp (FDIC), which currently has the possession of the bank, on Monday said that First Citizens Bancshares Inc has agreed to acquire the deposits and loans of failed Silicon Valley Bank (SVB) that collapsed earlier this month.

"The purchase by unit First–Citizens Bank & Trust Company includes the purchase of about $72 billion of Silicon Valley Bank's assets at a discount of $16.5 billion. The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion. The exact cost will be determined when the FDIC terminates the receivership," said the FDIC in a statement.

The statement further added that, "Prudent risk management approach will continue to protect customers and stockholders through all economic cycles and market conditions."

As per the reports suggest, First Citizen will receive a line of credit from the FDIC for contingent liquidity purposes and will have an agreement with the regulator to share some losses on commercial loans to provide further downside protection against potential credit risks. Moreover, the depositors of Silicon Valley Bridge Bank, National Association will automatically become the depositors of First Citizen & Trust Company.

On Sunday, Reuters had reported that First Citizens was already in advance talks with FDIC for this acquisition that involved the sale of all deposits and loans.

As per the FDIC's statement, the 17 former branches of SVB will open as First Citizen branches on Monday. It is also reported that the FDIC will retain about $90 billion of SVB's total assets of $167 billion as of March 10, while First Citizen will acquire $72 billion at a discount of $16.5 billion.

Silicon Valley Bank had been in the frame for around 40 years, headquartered in California, as a lender to some big companies. As per available data, the customer deposits in the SVB had tripled from 2018 to 2021 with a backup of low interest rate and cash-rich startups. As per reports, nearly half of US venture capital-backed healthcare and technology companies were financed by SVB. The bank's deposits increased from $62 billion in March 2010 to $124 billion in March 2021. By 2022 when the rates soared, the VC market exhibited some symptoms that eventually curbed the deposits at SVB. At the end of 2022, the bank reportedly had a $117 billion bond portfolio, dividend into a $91.3 billion held-to-maturity portfolio and a $26 billion available-for-sale portfolio. In early 2023, to raise the needed cash to fund withdrawals, the bank sold all of its available-for-sale securities and ended up with a $1.8 billion loss. On March 10, 2023 SVB failed after a bank run, marking the second-largest bank failure in United States history. On the same day, the California Department of Financial Protection and Innovation seized SVB and placed it under the receivership of FDIC.

As per the Federal Reserve data, First Citizens was the 30th largest commercial bank in the US by assets at the end of 2022.

Teena Jose

News Desk Reporter with Entrepreneur India

Teena is a post graduate in financial journalism. She has an avid interest in content creation, digital media and fashion.

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