The global financial market has been experiencing trepidatious times in the wake of the Silicon Valley Bank collapse that has led to contagion amidst financial institutions. The troubles at Signature Bank, Credit Suisse Bank, and First Republic Bank, have been pernicious to the confidence of people in the US Banking system. But perhaps investors can breathe a sigh of relief with the favorable news of First Citizens BancShares Inc’s decision of acquiring the deposits and loans of SVB, in a move to restore the disoriented faith.
According to Reuters, the FDIC (Federal Deposit Insurance Corporation), which has presently taken control over SVB, issued a statement to validate the equity appreciation rights of First Citizens BancShares stock, with the deal holding a potential value of nearly $500 million.
The SVB Collapse, which was the largest financial institution crash since the 2008 financial crisis, stressed the global financial market into predicting disastrous doomsday for the industry, with heightening worries of massive market disruption.
This crisis in confidence also triggered the failure of Signature Bank, the dwindling stock prices of First Republic Bank despite attempts of a $30 billion rescue led by eleven industry-dominating banks, and compelled Credit Suisse Bank to accept its fate at the hands of the rescue by UBS Bank.
The cryptocurrency market was on the podium of winning, with the gold medal being swooped in by the Bitcoin price which rose to 45 percent after the global banking failures.
First Citizens BancShares Takes Over Silicon Valley Bank:
Self-described as a bank to have sealed the deal with more FDIC-assisted transactions than any other bank since 2009, First Citizens Bank was confident of the resilience of its liaison with Silicon Valley Bank, backed by a diverse deposit base and loan portfolio.
The Raleigh-based First Citizens’ announcement of purchasing the trouble-plagued SVB quelled the chaotic distress that had unfolded when the U.S. Banking market befell $100 billion on the unfateful day of the SVB Collapse.
Amidst reports of a duel of US regional lenders vying to acquire SVB, between Valley National Bancorp and First Citizens BancShares, the latter emerged victorious.
Under the Entente deal, First Citizens Bank agreed to assume the entirety of the SVB assets of $110 billion in addition to the deposits of $56 billion and loans worth $72 billion, except $90 billion in securities at the disposal of the FDIC. The cost of the failure of the Silicon Valley Bank estimated to its Deposit Insurance Fund (DIF) by the FDIC was $20 billion.
“The prudent risk management approach will continue to protect stakeholders and customers through all the economic cycles and market conditions.”
The FDIC statement on Sunday also revealed that all of the SVB’s 17 branches would operate as “Silicon Valley Bank, a division of First Citizens Bank” from Monday providing complete access to SVB customers to their accounts through all mediums.
The brighter side of this deal for the First Citizen Bank was its accelerated expansion in California with wealth management capabilities in the northeast wing of the United States.
“At First Citizens, we are committed to building and preserving the strong relationships that the legacy SVB’s global fund banking business had with the private equity and venture capital firms.”
CEO Frank B Holding Jr also said in a statement that the First Citizens bank was looking forward to positioning the company for continued success by affirming its commitment to the integrity of the nation’s banking system.
For its contingent liquidity resolve, the First Citizens bank would also receive a line of credit from the FDIC, having agreed with the regulatory body of sharing losses on commercial loans, as a protection against potential credit losses in the bigger picture.
Analysts proclaimed this astute move was beneficial to the financial stability and the venture capital industry, but not too deeply.
A market strategist wrote of the biggest issue of the U.S. banking system – deposits abandoning smaller banks for larger banks or money market funds.
