A while back, the financial world became to shaken to its foundations. Silicon Valley Bank (SVB) suddenly fell hard. It was a huge bank and the debacle caused a lot of panic in the markets. It now appears that Silicon Valley Bank finally has been purchased by another American bank, First Citizens. The former SVB now seems to continue to exist under a different name.
The demise of SVB also had a major effect on the crypto market. Circle, the publisher of stablecoin USDC, had placed a significant part of its reserves with SVB. This caused USDC to temporarily lose its peg to the US dollar and the crypto market became extremely anxious.
First Citizens buys SVB
Remarkable about the deal is the fact that on paper First Citizens is a much smaller bank than SVB. The large SVB had Reportedly but over $200 billion in assets, while First Citizens only has a little over $100 billion. How is it possible that in this case the small bank was able to buy the big bank?
Initially, no bank was willing to buy SVB. This in contrast to, for example, Signature, which was already bought by Flagstar within a relatively short period of time. However, the demise of SVB was so problematic that potential buyers avoided the California bank with a wide berth.
A relief for the market
Until today. First Citizens has according to a press release of the American FDIC made the purchase of SVB official. It looks like First Citizens got a huge discount on the deal:
“Today’s transaction included the purchase of approximately $72 billion of the assets of Silicon Valley Bridge Bank, National Association at a discount of $16.5 billion. Approximately $90 billion in securities and other assets remain in trusteeship for sale by the FDIC.”
According to Bloomberg, another American bank, Valley National Bancorp, is also actively bidding for Silicon Valley Bank, although further details are not yet known at this time.