First Citizens, a US bank, announced on Monday that it had decided to buy all loans and deposits from Silicon Valley Bank, whose failure earlier this month had raised concerns about the industry all over the world.
SVB, a significant lender to the tech sector since the 1980s, was taken over by regulators following an unexpected run on deposits, making it the largest US bank to collapse since 2008.
After SVB’s collapse, regulators established Silicon Valley Bridge Bank, which First Citizens will take over as of Monday.
Assuming “all customer deposits and certain other liabilities of Silicon Valley Bridge Bank,” First Citizens stated that it had committed to buy “substantially all loans and certain other assets.”
“The transaction is structured as a whole bank purchase with loss share coverage,” it said in a statement.
It said the 17 former branches of SVB will open on Monday as “Silicon Valley Bank, a division of First Citizens Bank.”
The $119 billion in deposits and $72 billion in assets covered by the deal, according to the US Federal Deposit Insurance Corporation (FDIC) on Sunday.
The FDIC noted that SVB depositors will “automatically become depositors of First Citizens Bank,” continuing to guarantee deposits.
The Federal Reserve introduced a new lending tool for banks in an effort to stop a repetition of SVB’s quick demise, while the United States Treasury and Federal Reserve also laid out plans to ensure SVB customers could access their deposits.
Customers of US banks with comparable size experienced a crisis of trust following the collapse of SVB, and many withdrew their funds and deposited them in larger institutions because they believed that these institutions were too large for the government to fail to save them in a crisis.
The unrest also reached Europe, where UBS acquired ailing Swiss lender Credit Suisse.
Recently, concerns about a growing banking sector crisis were rekindled when shares in the long-struggling Deutsche Bank dropped sharply on Friday due to the lender’s rising cost of default insurance.
Even though the problems in the banking sector have been related to central banks’ rate hikes, they have continued with monetary tightening despite concerns about global contagion.
