All the costs of the failure of Silicon Valley Bank for the US budget
First Citizens will buy $110 billion in assets of Silicon Valley Bank, making it one of the fifteen largest banks in the United States. Instead, the bankruptcy of the Californian institute cost US public finances 20 billion
US banking holding company First Citizens BancShares announced today that it will acquire the deposits and loans of Silicon Valley Bank , the benchmark institute for Californian startups which failed in early March: it was the second largest bank failure in US history.
WHAT WILL HAPPEN TO SILICON VALLEY BANK
According to a statement from the FDIC – the US government agency that provides bank deposit insurance and which took control of Silicon Valley Bank after the bankruptcy -, First Citizens will buy 72 billion dollars of loans from the Californian institution (with one discount of 16.5 billion), 56 billion in deposits and 110 billion in assets.
In addition, First Citizens will receive a credit line from the FDIC for contingent liquidity purposes and will agree to share certain losses on commercial loans to "provide further downside protection against potential credit losses," Reuters said.
From today, the seventeen former branches of Silicon Valley Bank will reopen under the control of First Citizens.
THE IMPACT ON FDIC ACCOUNTS
As Bloomberg reconstructs, about 90 billion dollars in securities and other assets of Silicon Valley Bank will remain in receivership at the disposal of the FDIC, which also obtained the rights to revalue the shares of First Citizens worth 500 billion dollars.
The failure of Silicon Valley Bank will impact about $20 billion on the FDIC's Deposit Insurance Fund .
FIRST CITIZENS' INTEREST IN FAILED BANKS
According to Bloomberg sources, First Citizens reportedly made an offer to acquire Silicon Valley Bank soon after its bankruptcy. Reuters added that another regional bank, Valley National, had also shown interest.
The interest of First Citizens had raised some doubts among observers, who wondered if the institute possessed the means to manage the collapse of Silicon Valley Bank, one of the largest commercial banks in the United States; at the end of 2022, First Citizens was instead the thirtieth bank in the country by assets held.
On the other hand, First Citizens has some experience acquiring bankrupt rivals: it has bought more than twenty FDIC-assisted banks since 2009, and just last year completed the acquisition of CIT Group in a worthwhile deal. more than 2 billion.
WHAT CHANGES FOR FIRST CITIZENS
First Citizens is headquartered in North Carolina, and will now expand to California. It has assets of approximately 109 billion and total deposits of 89.4 billion. The acquisition of Silicon Valley Bank made it one of the fifteen largest banks in the United States, according to Bloomberg Intelligence.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/first-citizens-silicon-valley-bank/ on Mon, 27 Mar 2023 13:51:03 +0000.