Silicon Valley Bank’s recent collapse, which was the second-largest bank failure in US history, caused panic among investors and depositors and triggered a collapse in confidence in other vulnerable banks. However, a milestone moment for the banking crisis has occurred as a company has purchased most of what’s left of the bank that started the meltdown.
First Citizens Bank has purchased the remaining assets, deposits, and loans of Silicon Valley Bank. The Federal Deposit Insurance Corporation (FDIC) stated that this move could mean the crisis is beginning to ease. This article will delve into what this acquisition means for the bank crisis, the impact of Silicon Valley Bank’s collapse, how the acquisition came to be, and what the future holds for First Citizens Bank.
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The Collapse of Silicon Valley Bank and Its Impact
Silicon Valley Bank’s collapse on March 10, 2023, was caused by the $90 billion in US Treasuries it was holding when regulators took over. These bonds had fixed interest rates at below-market value, thanks to the Federal Reserve’s policy of steadily raising interest rates over the last year. When Silicon Valley Bank announced it had to sell about $21 billion of those Treasuries at a $1.8 billion after-tax loss to cover customers’ withdrawals, it essentially sparked a run on the bank.
Regulators shut down Silicon Valley Bank after clients withdrew $42 billion in a single day. It was the second-largest bank failure in US history, after only Washington Mutual in 2008. The FDIC agreed to guarantee all Silicon Valley Bank deposits, including those above the $250,000 per account that are usually insured.
First Citizens Bank’s Acquisition of Silicon Valley Bank
First Citizens Bank’s acquisition of most of Silicon Valley Bank’s business came as a surprise, especially considering that it was about half the size of SVB at the end of last year. First Citizens offers general banking services through more than 550 branches and offices in 23 states. With assets of $109 billion as of December 31, 2022, it was the 30th largest US bank according to the Federal Reserve. In contrast, SVB had assets of $209 billion at that time and was the nation’s 16th largest bank.
North Carolina-based First Citizens has purchased the remaining assets, deposits, and loans of Silicon Valley Bank. First Citizens is not taking on most of the $90 billion in US Treasuries that SVB was holding when regulators took over. As part of the deal, 17 branches of SVB will begin operating as “Silicon Valley Bank, a division of First Citizens Bank.” SVB customers should continue to use their current branch until they hear from First Citizens.
The Future of First Citizens Bank
The acquisition of Silicon Valley Bank’s assets, deposits, and loans will make First Citizens slightly larger than SVB had been before its collapse, with an estimated $219 billion in assets. With the purchase of most of SVB’s business, First Citizens will be able to expand its services and customer base. This acquisition will also enhance First Citizens’ position in the banking industry, and it is expected that this move will lead to a boost in its stock value.
In conclusion, the acquisition of Silicon Valley Bank’s assets, deposits, and loans by First Citizens Bank is a major development in the banking industry. It signals a positive shift towards recovery from the banking crisis that was caused by Silicon Valley Bank’s collapse. With this acquisition, First Citizens Bank will be able to expand its range of services and offerings to its customers, thereby strengthening its position in the banking sector.