March 27, 2023
CNBC recently published an article featuring Mark Williams, Master Lecturer of Finance, discussing the acquisition of the Silicon Valley Bank assets.
The winning bidder in the government’s auction of Silicon Valley Bank’s (SVB) main assets received several concessions to make the deal happen. According to a release from the Federal Deposit Insurance Corporation, First Citizens BancShares is acquiring $72 billion in SVB assets at a discount of $16.5 billion, or 23%. Even after the deal closes, however, the FDIC remains on the hook to dispose of about $90 billion in SVB assets being kept in receivership. The FDIC agreed to a five-year loss-sharing deal on commercial loans First Citizens is taking over, as well as a $70 billion credit line in case customers pull more deposits.
In addition to other deal terms the FDIC made, Williams argues this may be due to a tepid interest in SVB assets, “The deal was getting stale, I think the FDIC realized that the longer this took, the more they’d have to discount it to entice someone”.