The failing Silicon Valley Bank’s deposits and loans will be acquired by First Citizens BancShares Corp (FCNCA.O), the company announced on Monday. This announcement marks the end of one chapter in the confidence crisis that has ravaged the world’s financial systems.
In a separate statement, the Federal Deposit Insurance Corporation (FDIC), which recently acquired control of SVB, stated that as part of the arrangement, it was given equity appreciation rights in First Citizens BancShares stock, with a potential value of up to $500 million.
First Citizens claimed that the deal was set up so that the combined business would have a strong financial position and have a varied loan portfolio and deposit base.
According to the agreement, the subsidiary First-Citizens Bank & Trust Corporation will take over the $110 billion in assets, $56 billion in deposits, and $72 billion in loans of SVB.
Additionally, First Citizens Bank will work with the regulator to share losses in order to provide additional downside protection against potential credit losses, and it will also get a line of credit from the FDIC for contingency liquidity needs.
When California regulators shuttered SVB on March 10, it became the biggest bank to fail since the 2008 financial crisis, causing severe market dislocation and increased strain in the banking industry worldwide.
“The move is positive for financial stability and the venture capital industry,” said Gary Ng, Senior economist at Natixis Hong Kong said it was unclear whether the new firm will continue to play the same function as SVB in the future’s venture capital market.
With around $209 billion in assets and a Santa Clara base, SVB was listed as the 16th largest lender in the United States at the end of the previous year.
