First Citizens Bank to acquire Silicon Valley Bank following its collapse

The move is aimed at protecting depositors and preventing wider financial turmoil. Customers of SVB will automatically become customers of First Citizens, which is headquartered in Raleigh, North Carolina. The 17 former branches of SVB will open as First Citizens branches starting on Monday, 3 April 2023.

Silicon Valley Bank, based in Santa Clara, California, failed after depositors rushed to withdraw money amid fears about the bank’s health. It was the second-largest bank collapse in US history after the 2008 failure of Washington Mutual. The collapse of SVB prompted the US Federal Deposit Insurance Corp (FDIC) and other regulators to act to protect depositors.

The acquisition of SVB by First Citizens gives the FDIC shares in the latter worth USD 500 million (EUR 465 million). Both the FDIC and First Citizens will share in losses and the potential recovery on loans included in a loss-share agreement, according to the FDIC.

First Citizens Bank, which was founded in 1898, has more than USD 100 billion (EUR 92.9 billion) in total assets, with more than 500 branches in 21 states as well as a nationwide bank. It reported a net profit of USD 243 million (EUR 225 million) in the last quarter. The bank serves a similar clientele as Silicon Valley Bank.

More about the collapse of SVB and its effects

The collapse of Silicon Valley Bank and the seizure of New York-based Signature Bank by regulators on 12 March 2023 have raised concerns about the health of mid-sized banks that serve tech startups and venture capitalists. First Republic Bank, which serves a similar clientele and appeared to be facing a similar crisis, was battered by investors worried that it might collapse. This led 11 of the biggest banks in the country to announce a USD 30 billion (EUR 27.9 billion) rescue package.

The ripples of the collapse of SVB were felt in Europe too, where Credit Suisse was forced into a takeover by Swiss rival UBS earlier in March 2023 after its share price tumbled. However, in both the SVB and Signature Bank cases, the government agreed to cover deposits, even those that exceeded the federally insured limit of USD 250,000 (EUR 232,000), so depositors could access their money.

The acquisition of Silicon Valley Bank by First Citizens Bank is expected to provide stability for depositors and customers of both banks.

Steve Boms, Founder and President of Allon Advocacy and Executive Director of FDATA North America, shared valuable insights into the collapses of Silvergate, SVB, and Signature Bank and how US regulators prevented the crisis from spreading. We encourage you to read the whole article to get up to speed on the current banking crisis.