A buyer has been found for failed lender Silicon Valley Bank (SVB), with 17 former branches opening under First Citizens Bank on March 27, the Federal Deposit Insurance Corp. (FDIC) announced on March 26.
The FDIC stated that it had entered into an agreement with the Raleigh, North Carolina-based First Citizens Bank to purchase all SVB deposits and loans currently held by a special-purpose entity called Silicon Valley Bridge Bank.
The bridge bank was established by the FDIC to manage the deposit and loan books of the failed SVB as part of its orderly wind-down following its collapse earlier this month.
Depositors of SVB will automatically become depositors of First Citizens, with the 17 former branches of SVB opening as First Citizens branches on March 27.
“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First Citizens Bank & Trust Company that systems conversions have been completed to allow full-service banking at all of its other branch locations,” the FDIC stated.
All customer deposits assumed by First Citizens will continue to be insured by the FDIC up to the insurance cap.
The lightning-fast collapse of SVB earlier this month sparked fears of contagion in the banking sector, prompting U.S. financial authorities to respond with stabilization measures such as emergency swap lines at the Fed so that banks have access to ample liquidity.
As part of the SVB buyout deal, the FDIC has entered into a loss-share agreement with First Citizens, which means that the two entities will share in the losses and potential recoveries on the commercial loans purchased from SVB.
“The loss-share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers,” the FDIC stated.
By Tom Ozimek