First Citizens BancShares to Acquire Silicon Valley Bank Assets and Loans
North Carolina-based First Citizens BancShares has acquired the assets and loans of Silicon Valley Bank (SVB), which collapsed earlier this month triggering fears about the stability of other lenders. Under the deal announced by the US Federal Deposit Insurance Corporation (FDIC), all 17 former SVB branches will open under the First Citizens brand on Monday. The FDIC will still hold about $90bn of SVB’s assets, and the cost of SVB’s failure to its deposit insurance fund is estimated to be around $20bn.
Banking Crisis Fears Triggered by SVB Collapse
The failure of SVB triggered concerns about the stability of other lenders, leading to sharp falls in bank shares globally. In Europe, Swiss banking giant Credit Suisse’s strength was questioned, leading to a rushed takeover by UBS. The biggest bank failures in the US since the 2008 financial crisis were the collapse of SVB and Signature Bank. Rising interest rates over the past year, intended to control soaring prices, have hit the value of investments held by banks and contributed to bank failures in the US.
First Citizens BancShares, America’s Biggest Family-Controlled Bank
First Citizens, America’s biggest family-controlled bank, has been one of the largest buyers of troubled banks in recent years. It has purchased around $72bn of SVB’s assets and loans at a discount of $16.5bn. SVB customers are advised to continue using their current branch until they receive notice from First Citizens that their account has been fully moved across. The UK arm of SVB was bought by HSBC for £1 earlier this month.
Concerns of Further Problems in the Banking Sector
Central banks worldwide insist that the banking system is safe and lenders are well-capitalised, but the worry that has unnerved financial markets is that there could be other problems in the banking sector yet to emerge. The head of the International Monetary Fund, Kristalina Georgieva, warned that the turbulence in the banking sector was a cause for vigilance and that risks to financial stability had increased. Sarah Hewin, head of Europe & Americas research at Standard Chartered, said there was a “febrile environment” among investors, and that “there’s a lot of psychology rather than the reality which is running markets.”
Conclusion
The acquisition of SVB assets and loans by First Citizens BancShares has eased some concerns about the stability of other lenders. However, the banking sector’s turbulence remains a cause for vigilance, and investors remain nervous. Central banks worldwide maintain that the banking system is safe, but the worry persists that other problems may emerge. As interest rates rise, banks’ investments’ values are being hit, and concerns about further banking sector problems remain.
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