North Carolina-based First Citizens will buy Silicon Valley Bank, the tech-focused financial institution that collapsed earlier this month, rocking the banking industry and shocking the world.
The deal could reassure investors at a time of distrust in banks, although the Federal Deposit Insurance Corporation and other regulators had already taken extraordinary steps to prevent a broader banking crisis by ensuring that depositors at SVB and another US bank bankrupt could access all your money.
SVB clients will automatically become clients of First Citizens, which is based in Raleigh. SVB’s former 17 branches will open as First Citizens branches on Monday, the FDIC said.
Nasdaq-traded shares of First Citizen BancShares Inc. rose 12.4% to $654.95 in premarket trading Monday. Shares of San Francisco-based midsize First Republic Bank, which serves a similar clientele to Silicon Valley Bank and appeared to be facing a similar crisis, rose 24.3% in premarket trading. .
European shares opened higher on Monday, with German bank Commerzbank AG rising 2.4% and BNP Paribas 1.2%.
Investors worry that other banks will also collapse under the pressure of higher interest rates. Much of the focus on Friday was on Deutsche Bank, whose shares fell 8.5% in Germany, though they rose again 3.6% in early trading on Monday. Earlier this month, shares and faith in Swiss bank Credit Suisse fell so low that regulators negotiated a takeover by rival UBS.
In the US, Santa Clara, California-based SVB went bankrupt on March 10 after depositors rushed to withdraw money amid fears about the bank’s health. It was the second-biggest banking collapse in US history after the 2008 Washington Mutual bankruptcy. Two days later, regulators seized New York-based Signature Bank in the third-biggest US bank failure.
In both cases, the government agreed to cover deposits, even those that exceeded the federally insured limit of $250,000, so that depositors could access their money.
New York Community Bank agreed to buy a significant part of Signature Bank in a $2.7 billion deal a week ago, but the search for a buyer for SVB took longer.
After First Republic Bank was hit with heavy sales by panicked investors, 11 of the country’s largest banks announced a $30 billion bailout package. The money has given First Republic a lifeline as it searches for a buyer.
The Silicon Valley Bank sale announced Sunday night involves the sale of all of SVB’s deposits and loans to First-Citizens Bank and Trust Co., the FDIC said.
The acquisition gives the FDIC shares in First Citizens worth $500 million. Both the FDIC and First Citizens will share losses and potential recovery on loans included in a loss-sharing agreement, the FDIC said.
The FDIC will retain about $90 billion of Silicon Valley Bank’s $167 billion in total assets, effective March 10, while First Citizens will acquire $72 billion at a discount of $16.5 billion, the FDIC said. He said he estimates the failure of Silicon Valley Bank will cost its industry-funded Deposit Insurance Fund some $20 billion.
[Con información de The Associated Press]
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