After this, all the account holders of SVB would automatically become users of First Citizens. This news has come as a major relief for SVB users who were in dire need of their funds.
The news came from Federal Deposit and Insurance Corporation (FDIC) which had been looking out for an appropriate buyer for the defaulted bank. According to the official statement of the FDIC, 17 branches of SVB will open today on the 27th of March, and will operate as the branches of the First Citizens Bank and Trust Company.
With the acquisition, all depositors of Silicon Valley Bank will be transferred to First Citizens Bank. Silicon Valley Bridge Bank had around $167 billion in total assets and $119 billion in total deposits as of March 10, 2023.
The transaction included the purchase of about $72bn of Silicon Valley Bridge Bank's assets at a discount of $16.5bn. Around $90 billion in securities and other assets will be held by the FDIC for disposition as part of the receivership.
The majority of the Silicon Valley Bank account holders were tech giants including Fitbit and Pinterest who had their funds locked during the SVB bank run. The collapse of SVB is a clear case of ineffective fund management and having almost all the eggs in the same basket.
When the FED increased the interest rates, the price of the government and corporate bonds fell drastically and SVB faced a dire liquidity crunch. To continue operating the bank, SVB had to sell a part of its bond portfolio at a loss of $21 billion which created a panic in the market and led to a full-fledged bank run.
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