NEW YORK (AP) — First-time citizens have a lot going for them Silicon Valley Bankthe tech-focused financial institution that collapsed this month, setting off a chain reaction that led to the failure of a second bank and tested confidence in the global banking sector.
The Federal Deposit Insurance Corporation and other regulators already had took emergency measures to avert the wider banking crisis by ensuring that depositors at SVB and the failing Bank can access all their money.
While more than half of Silicon Valley’s assets will remain in U.S. hands, the First Citizens deal announced late Sunday, at least initially, seemed to achieve what regulators wanted: strengthening confidence in US regional banks.
In Monday’s opening bell, shares of mid-sized banks such as Keycorp, Zions and First Horizon rose 8%. The first republican bank, which a $30 billion bailout of the nation’s 11 largest banks, which rose 23% after the collapse of Silicon Valley.
Customers of SVB automatically become customers of First Citizens, headquartered in Raleigh, North Carolina. The FDIC said 17 former SVB branches will open Monday as the first Citizens Branches.
European stocks rose Monday, with German lender Commerzbank AG up 2.4% and BNP Paribas up 1.2%. Concerns about the spread in the banking sector quickly spread to Europe and regulators there this month mediated by UBS takeover from troubled Swiss bank Credit Suisse.
Deutsche Bank shares fell 8.5% on Friday for similar reasons, the interest rate hike, but the German bank’s shares fell 3.6% on Monday.
Silicon Valley, located in Santa Clara, California, March 10 was broken in a bank where customers rushed to withdraw money due to fear of the bank’s solvency. It was the second largest bank failure in US history after the failure of Washington Mutual in 2008. Two days later, Signature Bank of New York was seized by regulators in the third-largest US banking failure.
In both cases, the state agreed to cover the savingseven those who exceeded the federally insured limit of $250,000, then depositors were able to access their money.
Community Bank of New York has agreed to acquire a significant portion of Signature Bank in a $2.7 billion deal a week ago, but the search for a buyer for SVB has dragged on.
The Silicon Valley Bank sale includes the sale of all of SVB’s deposits and loans to First-Citizens Bank and Trust Co., the FDIC said.
The purchase gives the FDIC a $500 million stake in First Citizens. The FDIC said that both the FDIC and First Citizens will share in the potential losses and recoveries of the loans included in the settlement agreement.
The FDIC said it will hold about $90 billion of Silicon Valley Bank’s $167 billion in assets as of March 10, while First Citizens will get $72 billion at a discount of $16.5 billion, the FDIC said. It said it estimated Silicon Bank’s failure would cost its industry-funded Deposit Insurance Fund about $20 billion.
First Citizens Bank was founded in 1898 and says it has more than $100 billion in assets, has more than 500 branches in 21 states, and is a nationwide bank. It made a net profit of $243 million in the last quarter. It is one of the top 20 banks in the US and says it is the largest family-controlled bank in the country.