First Citizens Bank will buy the bulk of collapsed Silicon Valley Bank to maintain faith in the banking system and stem any chain reactions.
Citizens will pull SVB out of Federal Deposit Insurance Corporation receivership, where its assets have been stored since the tech-focused bank’s collapse earlier this month.
In announcing the acquisition, Citizens’ chairman and CEO Frank Holding Jr. touted the bank’s wealth and solidity and said his was the institution for the job.
“First Citizens has a reputation for financial strength, exceptional customer service and prudent lending that spans 125 years,” Holding said in a statement. “We have partnered with the FDIC to successfully complete more FDIC-assisted transactions since 2009 than any other bank, and we appreciate the confidence the FDIC has placed in us once again.”
He added that Citizens’ move was designed to “affirm our commitment to support the integrity of our nation’s banking system.”
Citizens will take on $110 billion in SVB assets, $56 billion in deposits and $72 billion in loans. The bank will also receive a line of FDIC credit “for contingent liquidity purposes” and work with the FDIC to shore up any future credit losses, Citizens said.
The purchase, announced late Sunday, came after the FDIC and other regulators rushed in to guarantee all depositors in SVB and the also-tanked Signature Bank, even those that were above the $250,000 FDIC insured limit. They did not bail out the shareholders.
The $20 billion price tag comes from a bank-backed FDIC fund, though that does not preclude banks passing some of the bill on to customers via higher fees or les interest, noted Aaron Klein, a senior fellow at the Brookings Institution and a former official at the Treasury Department.
The deal seemed to shore up trust in the country’s other regional banks, with stock prices strengthening for First Republic, PacWest Bancorp. and other institutions that had looked shaky enough to trigger a bank run like the one at SVB.
SVB and Signature marked the second- and third-largest failures in U.S. banking history, and the measures were taken to ward off larger-scale failure.
“The financial system is like a boat,” Klein said. “SVB’s collapse has rocked the boat, but the ship is righting itself.”