First Citizens Plans to acquire Failed Silicon Valley Bank

The Federal Deposit Insurance Corporation is currently in charge of Silicon Valley Bank (SVB), a state-chartered commercial bank with its headquarters in Santa Clara, California (FDIC). It had locations in Massachusetts and California and was the biggest bank in Silicon Valley in terms of deposits.

Customers of SVB have been given the assurance in a memo provided by the FDIC that insured depositors will have access to their money by Monday. Deposits are only up to $250,000 guaranteed, and non-insured depositors will receive an advanced dividend within the upcoming week.

Since 2008, SVB, a significant lender to the IT sector since the 1980s, has failed more frequently than any other American bank.

Many warning flags surfaced as experts and authorities started sorting through the debris. Surprisingly, SVB’s vulnerabilities weren’t particularly intricate.

The bank was a part of SVB Financial Group, a publicly traded bank holding corporation with locations in 13 different states in the United States and more than a dozen foreign countries.

According to Reuters.com, First Citizens said the transaction was structured to preserve its solid financial position and the combined company remains resilient with a diverse loan portfolio and deposit base.

Under the deal, unit First–Citizens Bank & Trust Company will assume SVB assets of $110 billion, deposits of $56 billion and loans of $72 billion.

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

The regulator noted that some $90 billion in securities and other SVB assets will continue to be in receivership pending disposal.

When combined with traditional consumer panic, simple business mismanagement was shown to be an existential fault in the autopsy of SVB.

On Monday, Silicon Valley Bank, a part of First Citizens Bank, will start conducting business at the 17 locations that once belonged to SVB.

To recognize when the party is over in a particular sector and minimize your losses, you must learn to perceive things through the prism of time.

When your bank is found to be heavily exposed to a certain sector, there needs to be a planned action plan to pull the plug. Banks must intentionally diversify their risk on the supply side of the funds in the case of an overexposure to a particular industry.

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