SVB collapse costs $20bn in deposit insurance

The failure of Silicon Valley Bank SVB will be mostly taken over by First Citizens, a North Carolina lender, and its collapse will cost $20 billion 16 bn in deposit insurance payouts, US regulators said on Monday.

First Citizens will take over all $119 billion in deposits and loans from the entity set up after SVB collapse earlier this month.

After the share price fell, Credit Suisse was forced into a takeover by Swiss rival UBS last week after the collapse of SVB caused a lot of turmoil in the global banking sector.

The failure of SVB will cost about $20 billion, according to the Federal Deposit Insurance Corporation FDIC, a US government agency that insures bank deposits up to a certain amount. The deposit insurance fund, which is paid for by banks with deposits that are insured, will be responsible for those costs, it said on Monday.

SVB had grown into a big lender by focusing on startups and fast-growing companies in the Silicon Valley tech sector, with operations in other countries including the UK. The customers of SVB s bonds started withdrawing their deposits en masse, as it became clear that the value of the bonds had fallen because of rising interest rates. The Biden administration stepped in and said it would cover all deposits at the bank, including those not federally insured, who were fearing that contagion would spread across the sector.

The SVB entity had about $167 bn in total assets and about $119 bn in total deposits on March 10, according to the FDIC. First Citizens bought about $72 billion of the failed bank's assets at a discount of $16.5 billion. First Citizens will take over and run the 17 SVB branches.

The UK government brokered a deal for HSBC to buy Silicon Valley Bank's UK operations for 1 in a rescue deal two weeks ago.

First Citizens was founded in 1898 to serve the farmers of North Carolina. In 1935, RP Holding took over the leadership of the bank, and has been run by his descendants since then. It survived the 2008 financial crisis intact and has grown through acquisitions since under the leadership of Frank B Holding Jr and his sister Hope Holding Bryant. A $2 billion deal last year to take over the business lender CIT Group pushed it into the top 20 US banks by assets, according to the company.

About 90 billion dollars in SVB's securities and other assets will remain under the control of the FDIC as it tries to minimize losses for depositors and investors.

The regulator has entered into an agreement with First Citizens to cover some of the losses on loans held by SVB.