By Daniel Lanyon on Monday 27 March 2023
Concerns over the health of global banks has eased following a deal to rescue the assets of Silicon Valley Bank, three weeks after its collapse.
Silicon Valley Bank's loans and other assets have been handed to First Citizens Bank in a deal with the Federal Deposit Insurance Corporation (FDIC).
The deal will see First Citizens seek to grow its presence in SVB’s venture capital business as it takes charge of $72 billion of Silicon Valley Bridge Bank, National Association's assets at a nearly 80 per cent discount of $16.5bn. $90 billion in securities and other assets will be held back by FDIC for disposal.
Susannah Streeter, head of money and markets, Hargreaves Lansdown, says the move helped boost banking stocks around the world, including a 1 per cent uplift in the FTSE 100.
“With Silicon Valley Bank’s deposits and loans now housed in longer term accommodation in the US, a calm of sorts has descended on the banking sector but hopes that this move will see significant stability return may be short-lived,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“For now, though, there is relief that First Citizens Bank, one of America’s largest family-controlled banks, has come to the rescue by snapping up $72bn of SVB's assets at a discount of $16.5bn from the Federal Deposit Insurance Corporation,” she added.
FDIC and First–Citizens Bank have a further deal to share both profits and losses on the commercial loans purchased by the former from the latter.
"Shunting parts of the failed bank off to a new owner to may give the regulator more capacity to deal with problems still threatening to pop up elsewhere, particularly with US regional banks."
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