First Citizens has agreed to buy Silicon Valley Bank, the California lender that served as a lifeline for thousands of startups before the collapse sent shockwaves through the financial sector, the U.S. Federal Deposit Insurance Corporation said Monday. Silicon Valley Bank’s bankruptcy is estimated to result in a loss of about $20 billion for the deposit insurance fund, the regulator said.
The deal includes the purchase of approximately $72 billion of Silicon Valley Bank assets at a discount of $16.5 billion. Approximately $90 billion in securities and other assets of the California-based lenders will remain “under receivership” by the FDIC.
The announcement comes weeks after the FDIC seized control of Silicon Valley Bank after a run on deposits left the lender insolvent. Silicon Valley Bank’s 17 former branches will open Monday as First Citizens Bank, the FDIC said.
The Silicon Valley bank collapse shook up the banking industry, especially regional banks, prompting the FDIC to transfer all SVB deposits to a new “bridge bank” to protect depositors. Soon after, the Federal Reserve provided relief to the lender’s depositors by ensuring they were fully protected. Depositors were given access to all their money from 13 March.
“In addition, the FDIC received equity valuation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million,” the FDIC said in a statement.
Before the collapse, Silicon Valley Bank was the 16th largest bank in the US. The abrupt collapse, which temporarily left thousands of startup founders struggling to earn the payrolls and continue operations, was the largest bank failure in the US since the 2008 financial crisis. Monday’s deal follows a similar move at Signature Bank a week ago is acquired by Flagstar.
“First Citizens has a proud history of growing organically and through strategic acquisitions that build our core capabilities in a careful and considered manner,” Frank B. Holding, Jr., Chairman and CEO of First Citizens, said in a statement.
Holding Jr., whose grandfather founded the North Carolina-based lender, has overseen nearly two dozen acquisitions since taking over the top role in 2008. Last year, First Citizens acquired CIT, a lender to midsize businesses, for $2 billion.
The acquisition of Silicon Valley Bank will strengthen First Bank’s ability to serve companies in the private equity, venture capital and technology sectors, he said.
“We are particularly committed to building on and maintaining the strong relationships SVB’s legacy Global Fund Banking businesses have with private equity and venture capital firms. This transaction will also accelerate our expansion in California and introduce equity opportunities in the Northeast. SVB’s Private Wealth business fits very well with our high-touch and sophisticated level of high-quality customer service and approach,” he added.
The bankruptcy of Silicon Valley Bank has exposed many of the banks’ weaknesses and prompted scrutiny from the Fed’s oversight. Even when Silicon Valley Bank was unusually vulnerable because of its business model — serving primarily tech startups and venture investors who poured in tens of billions of dollars during the peak funding cycle in 2021 and have since struggled to raise new capital and quickly plow through their savings — its collapse invites many to advocate for a change in how lenders value their assets in financial statements.
The Bank of England said last week it had warned US regulators about growing risks at Silicon Valley Bank long before its collapse.