First Citizens (NASDAQ: FCNCP) has agreed to buy a large portion of Silicon Valley Bank, the U.S. Federal Deposit Insurance Corporation (FDIC) said on Sunday. The deal comes just over two weeks after the regional lender collapsed, sending shockwaves around the global banking system.
The deal includes about $72 billion of SVB's assets sold at a steep discount of $16.5 billion to First Citizens, the FDIC said in a statement. The regulator added that approximately $90 billion of SVB's securities and other assets will remain "in receivership for disposition by the FDIC."
The sale comes as the FDIC transferred all of SVB's deposits and assets into a the new Silicon Valley Bridge Bank earlier this month in effort to stabilize the institution and protect depositors following the bank's failure. As of March 10, the bridge bank had around $167 billion in total assets and approximately $119 billion in total deposits, according to the FDIC.
The regulator took control of SVB in early March after the bank failed to raise $2.25 billion to meet withdraw demand from clients after the value of SVB's assets dropped dramatically due to the Federal Reserve's aggressive interest rate hikes over the past year.
Following the deal, all 17 former branches of SVB will open as First-Citizens Bank & Trust Company starting Monday, the FDIC said. First-Citizens Bank & Trust Company is a subsidiary of First Citizens BancShares.
The regulator added that SVB customers should continue to use their current branch until they are notified by First Citizens that "systems conversions have been completed to allow full-service banking at all of its other branch locations."
FDIC said the estimated cost of the bank's failure to its Deposit Insurance Fund will be approximately $20 billion.
Federal Reserve Governor Michael Barr called SVB's failure a "textbook case of mismanagement" in prepared remarks for two congressional hearings this week, citing mismanagement and the need for more regulation and oversight.
"The bank waited too long to address its problems, and ironically, the overdue actions it finally took to strengthen its balance sheet sparked the uninsured depositor run that led to the bank's failure."
The Fed is currently conducting a review of the SVB collapse, with its findings set to be released on May 1. Barr said he is "committed to ensuring that the Federal Reserve fully accounts for any supervisory or regulatory failings, and that we fully address what went wrong."
"Specifically, we are evaluating whether application of more stringent standards would have prompted the bank to better manage the risks that led to its failure," Barr said. "We are also assessing whether SVB would have had higher levels of capital and liquidity under those standards, and whether such higher levels of capital and liquidity would have forestalled the bank's failure or provided further resilience to the bank."
Barr and other federal financial regulators, including FDIC Chair Martin Gruenberg and Treasury Undersecretary Nellie Liang, are set to testify before the Senate Banking Committee and the House Financial Services Committee as Congress reviews the failure of SVB, which is the largest bank collapse since the global financial crisis.