First Citizens Bank to Acquire Silicon Valley Bank Deposits and Loans

First Citizens Bank, a North Carolina-based bank, is set to acquire Silicon Valley Bank’s deposits and loans following the latter’s collapse in March 2023. The Federal Deposit and Insurance Corporation (FDIC) approved the purchase and assumption agreement, which includes the acquisition of $72 billion of Silicon Valley Bridge Bank, National Association’s assets at a discount of $16.5 billion. The agreement also stipulates that 17 former branches of Silicon Valley Bank will operate as First Citizens Bank and Trust Company starting on March 27.

As part of the agreement, all Silicon Valley Bank depositors will automatically become depositors of First Citizens Bank. The FDIC will keep approximately $90 billion in securities and other assets in receivership for disposition. In addition, the FDIC will receive equity appreciation rights in First Citizens BancShares, Inc. common stock worth up to $500 million.

First Citizens Bank is now the 30th largest commercial bank in the US, with $167 billion in total assets and $119 billion in deposits as of March 10. The acquisition of Silicon Valley Bank’s deposits and loans is expected to boost the bank’s assets and expand its operations in California’s tech hub.

Silicon Valley Bank collapsed on March 10 after rumors of a severe liquidity crisis sparked a bank run. The FDIC was then appointed as the receiver of the failed bank and attempted to auction off the fallen bank’s assets. The process included two separate auctions for Silicon Valley Bank’s assets: one for its traditional deposits unit and the other for its private bank, which catered to high-net-worth individuals and was housed within its retail operations.

Several firms were reportedly planning or had submitted bids for Silicon Valley Bank. First Citizens Bank was one of them, with reports suggesting it had been planning a bid as early as March 18. Three days later, the bank reportedly submitted a bid for all of Silicon Valley Bank. A First Citizens spokesperson declined to comment on “market rumors or speculation” at the time. Valley National Bancorp was also understood to have submitted a bid for the collapsed bank.

Meanwhile, Citizens Financial Group, another US regional bank, was reportedly preparing to submit an offer for Silicon Valley Bank’s private banking arm. The bank’s collapse highlights the challenges faced by banks in the tech industry and the importance of maintaining adequate liquidity. The acquisition by First Citizens Bank underscores the bank’s confidence in the US banking system and its ability to weather crises.


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Federal Reserve Admits Blindsided Oversight of SVB Collapse

The recent collapse of Silicon Valley Bank (SVB) has prompted an internal investigation by the Federal Reserve to look into the failure of the bank and the Fed’s regulation of it. Federal Reserve Chairman Jerome Powell has admitted to being blindsided by the sudden collapse of SVB despite being under their supervision. This has raised concerns about the effectiveness of the Federal Reserve’s oversight of banks in the United States.

SVB’s collapse has been linked to the Federal Reserve’s successive interest rate hikes aimed at taming inflation, which eroded SVB’s long-term bonds purchased at near-zero rates. When SVB announced that it suffered a $1.8 billion after-tax loss and was looking to raise $2.25 billion, the market panicked, leading to a $160 billion wipeout in its market cap in 24 hours. Despite SVB CEO Greg Becker urging investors to “stay calm” and not to “panic”, depositors began to request withdrawals from SVB en masse, causing a bank run.

On March 10, the United States Federal Deposit Insurance Commission stepped in, taking possession of SVB to help depositors get access to their money. Emergency measures were put in place by the government soon after to guarantee all deposits at SVB. This has raised concerns about the stability of the banking system and the need for stronger regulatory measures to prevent such occurrences in the future.

Powell has confirmed that Vice Chairman Michael Barr will be testifying next week as part of the internal investigation. Powell’s interest is in identifying what went wrong and how it can be prevented in the future. However, some politicians, including U.S. Senator Elizabeth Warren, have expressed their frustration with Powell and his regulatory approach toward large banks in the U.S. over the last five years, which they believe has been weak.

Warren believes that Powell’s nine consecutive interest rate hikes to 5% pose a risk to the economy, potentially pushing it into a recession. She has also criticized Powell’s approach to banking regulation, stating that it is a factor to blame for the recent banking crisis. The collapse of SVB has highlighted the need for stronger regulatory measures to ensure the stability of the banking system and prevent future occurrences.

In conclusion, the collapse of Silicon Valley Bank has raised concerns about the effectiveness of the Federal Reserve’s oversight of banks in the United States. The internal investigation into the failure of the bank and the Fed’s regulation of it will hopefully identify what went wrong and how to prevent it in the future. The incident has also highlighted the need for stronger regulatory measures to ensure the stability of the banking system and prevent future occurrences.


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Future of Silicon Valley Bank May Put Trillions of Dollars at Risk

The potential collapse of Silicon Valley Bank (SVB) has caused alarm among regulators, investors, and depositors alike, with experts warning that the fallout could extend far beyond the tech bank itself. The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) have been closely monitoring the situation and considering their options, but there are growing concerns that any missteps could have serious consequences for small banks across the United States.

According to Bob Elliot, a former Bridgewater executive and CEO of investment firm Unlimited, nearly a third of all deposits in the United States are held in small banks, and around 50% of these deposits are uninsured. While the FDIC does insure small deposits in all banks in the US, this only covers about $9 trillion of the nearly $17 trillion of outstanding deposit base. Under the hood, the coverage rate is roughly 50% across most institutions, while credit unions are higher.

With small banks in the United States holding $6.8 trillion in assets and $680 billion in equity as of February 2023, the failure of a major institution like SVB could trigger a chain reaction that puts thousands of small banks at risk of a run. As Elliot points out, this is not just a Wall Street problem, but a “main street problem” that could have serious implications for businesses and individuals across the country.

These concerns have been echoed by others in the industry, including Y Combinator CEO Garry Tan, who created a petition urging regulators to step in and implement a backstop for depositors. The petition notes that nearly 40,000 of all depositors at Silicon Valley Bank are small businesses, and warns that over 100,000 people could lose their jobs if swift action is not taken.

In response to these concerns, the FDIC and the Fed are reportedly discussing the creation of a fund to backstop more deposits at troubled banks. This fund would respond to the SVB collapse and would be intended to reassure depositors and reduce panic. While the details of this fund are still being worked out, it is clear that regulators are taking the situation seriously and are actively looking for ways to mitigate the potential risks.

Silicon Valley Bank is one of the top 20 largest banks in the United States and provides banking services to many crypto-friendly venture firms. The bank’s collapse would be felt throughout the industry, with assets from blockchain venture capitalists totaling more than $6 billion at the bank. Some of the largest investors include Andreessen Horowitz with $2.85 billion, Paradigm with $1.72 billion, and Pantera Capital with $560 million.

The future of Silicon Valley Bank is still uncertain, but what is clear is that the decisions made by regulators in the coming days and weeks will have significant consequences for the banking industry as a whole. As Elliot warns, the potential risks extend far beyond SVB itself and could put trillions of dollars at risk if not handled carefully.


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Bank Runners In Afghanistan See No Cash, Sought To Flee The Country After Taliban Takeover

As the Taliban advances after the President fled, Afghans fail to withdraw life savings due to cash shortage.

​Hundreds of residents of the Afghan capital, Kabul, rushed to banks on August 15 to withdraw money from their bank accounts as Taliban fighters took over the city demanding the government’s surrender, Al Jazeera reported.

After the Taliban takeover, which followed hours of negotiations for a peaceful transition of power with President Ashraf Ghani, Afghans and foreigners alike have been racing to the airport to exit the city. Ghani later left the country, and the Taliban said it would soon announce the Islamic Emirate of Afghanistan from the presidential palace.

Hundreds of people have since lined up at cash machines and bank agencies to withdraw their life savings before fleeing the country, but only to hit a brick wall. Abdul Mossawer, a 32-year-old policeman, was told by bank workers that there was no cash for him to withdraw. Even though he insisted, the bankers would repeatedly tell various reasons for the delay in getting the people their money.

Afghans wait in long lines for hours to withdraw money in front of a bank in Kabul. [Rahmat Gul/AP Photo]

Afghans wait in long lines for hours to withdraw money in front of a bank in Kabul. [Rahmat Gul/AP Photo]

“Is your money in the bank? Then it’s not yours. Afghanistan is just the latest crisis to illustrate the critical value of custodying your family’s savings,” tweeted Alex Gladstein, Chief Strategy Officer of the Human Rights Foundation.

The fractional reserve-based financial system that rules today, along with the reign of fiat currencies, has intrinsic downsides. Since the balance in your checking bank account is not fully there, a bank run would cause chaos, similar to the Afghan situation. Bank accounts can be quickly frozen, and a person bearing considerable amounts of cash can become an obvious target for criminals.

Unfortunately for most Afghans, who weren’t able to withdraw their money and flee the country, there is little they can do as they have their hands tied to the arbitrary decisions of third parties under a crisis. But with Bitcoin and self-custody, as Gladstein points out, the story could’ve been different. Had people kept their life savings in BTC instead of fiat currency, not only would they be able to easily carry it anywhere without asking permission, but they would also enjoy a growing purchasing power over the years.

Among oppressive regimes, harmful economic policies, war zones, and monetary colonialism, Bitcoin is uniquely positioned to restore freedom and sovereignty worldwide. The distributed electronic money that asks permission from no one can bring about lasting change in the five edges of the globe, but its benefits need greater awareness.


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