First Citizens Agreed To Acquire Failed Silicon Valley Bank

First Citizens BancShares Inc announced on Monday that it will acquire the deposits and loans of bankrupt Silicon Valley Bank, concluding one chapter in the global financial markets' confidence crisis.

The Federal Deposit Insurance Corporation (FDIC), which assumed control of SVB earlier this month, said in a separate statement that as part of the arrangement, it got equity appreciation rights in First Citizens BancShares stock worth up to $500 million.

According to First Citizens, the acquisition was structured to protect the company's strong financial position, and the merged company would be resilient with a varied loan portfolio and deposit base.

Under the conditions of the deal, Firstndash;Citizens Bank amp; Trust will acquire $110 billion in SVB assets, $56 billion in deposits, and $72 billion in loans.

"Prudent risk management approach will continue to protect customers and stockholders through all economic cycles and market conditions," according to the statement.

First Citizens Bank will also receive a line of credit from the FDIC for contingency liquidity purposes, as well as a loss-sharing arrangement with the regulator to give further downside protection against potential credit losses, said the company.

When California authorities closed SVB on March 10, it was the largest bank to collapse since the 2008 financial crisis, causing huge market upheaval and heightened stress across the banking sector internationally.

"The move is positive for financial stability and the venture capital industry," said Gary Ng, senior economist at Natixis Hong Kong, adding that it was unclear if SVB's position in the venture capital industry will be carried over to the new entity.

SVB, based in Santa Clara, was the 16th largest lender in the United States at the end of last year, with around $209 billion in assets.

According to the FDIC, the acquisition of around $72 billion in SVB assets came at a $16.5 billion discount.

"The FDIC estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion. The exact cost will be determined when the FDIC terminates the receivership,"  It stated.

The regulator added that around $90 billion in securities and other assets from SVB will remain in receivership pending disposal.

SVB's 17 former branches will reopen on Monday as Silicon Valley Bank, a part of First Citizens Bank.

First Citizens has around $109 billion in assets and $89.4 billion in deposits.

When California authorities closed SVB on March 10, it was the largest bank to collapse since the 2008 financial crisis.