Silicon Valley Bank: Collapsed US lender bought by rival

Silicon Valley Bank branchReuters

The assets and loans of collapsed US lender Silicon Valley Bank (SVB) are being bought by rival First Citizens BancShares.

The failure of SVB earlier this month triggered fears about the stability of other lenders, sparking sharp falls in bank shares around the world.

In Europe, worries over the strength of Swiss banking giant Credit Suisse led to a rushed takeover by rival UBS.

Markets have remained nervous, although bank shares opened higher on Monday.

Shares Germany’s Deutsche Bank fell by 14% at one point on Friday, before recovering some ground. As trading began on Monday they rose by about 3%.

SVB was seized by US regulators earlier this month after a run on the bank, and its collapse was swiftly followed by the failure of another US bank Signature Bank.

The demise of the two were the biggest bank failures in the US since the financial crisis of 2008.

Under the SVB takeover deal, announced by the US Federal Deposit Insurance Corporation (FDIC), all 17 former SVB branches will open under the First Citizens brand on Monday.

SVB customers are being advised to continue using their current branch until they receive notice from First Citizens Bank that their account has been fully moved across.

First Citizens is based in Raleigh, North Carolina and calls itself America’s biggest family-controlled bank. It has been one of the largest buyers of troubled banks in recent years.

It has bought around $72bn of SVB’s assets and loans at a discount of $16.5bn. The FDIC will still hold about $90bn of SVB’s assets.

The FDIC said the cost of SVB’s failure to its deposit insurance fund would be about $20bn.​

The UK arm of SVB was bought by HSBC earlier this month for £1.

Threat of rising rates

Interest rates were cut sharply during the 2008 global financial crisis and again during the Covid pandemic as central banks around the world sought to encourage economic growth.

But rates have been rising over the past year as central banks try to rein in soaring prices.

These rate rises have hit the value of investments that banks keep some of their money in, and contributed to the bank failures in the US.

The worry that has unnerved financial markets is that there could be other problems in the banking sector, which have not yet emerged.

Central banks around the world have stressed that the banking system is safe and lenders are well capitalised.

Sarah Hewin, head of Europe & Americas research at Standard Chartered bank, told the BBC’s Today programme that there is a “very febrile environment” among investors.

“At the moment there’s a lot of psychology rather than reality which is running markets.”

On Sunday, the head of the International Monetary Fund, Kristalina Georgieva, said there was a “need for vigilance” given the turbulence in the banking sector and warned it was “clear that risks to financial stability have increased”.

“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates… inevitably generates stresses and vulnerabilities.”

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