Tag: SVB

One of the most prominent lenders in the world of technology startups, Silicon Valley Bank, which was struggling, collapsed on March 10, after a run on the bank by the depositors….reports Asian Lite News

The Federal Deposit Insurance Corporation (FDIC) has entered into a purchase and assumption agreement for all deposits and loans of recently failed US-based Silicon Valley Bridge Bank by First-Citizens Bank and Trust Company, Raleigh, North Carolina.

The FDIC created Silicon Valley Bridge Bank, National Association, following the closure of Silicon Valley Bank by the California Department of Financial Protection and Innovation. All of the deposits–both insured and uninsured–and substantially all assets and all Qualified Financial Contracts of Silicon Valley Bank were transferred to the bridge bank. The purpose of establishing Silicon Valley Bridge Bank, National Association, was to allow time for the FDIC to stabilize the failed banking institution.

One of the most prominent lenders in the world of technology startups, Silicon Valley Bank, which was struggling, collapsed on March 10, after a run on the bank by the depositors.

The 17 former branches of Silicon Valley Bank will now open as First-Citizens Bank and Trust Company starting today.

“Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First-Citizens Bank & Trust Company that systems conversions have been completed to allow full-service banking at all of its other branch locations,” FDIC said in a statement Sunday (local time).

Depositors of Silicon Valley Bank will automatically become depositors of First-Citizens Bank and Trust Company. All deposits assumed by First-Citizens Bank & Trust Company will continue to be insured by the FDIC up to the “insurance limit”.

As of March 10, 2023, Silicon Valley Bank had approximately USD 167 billion in total assets and about USD 119 billion in total deposits.

Today’s transaction included the purchase of about USD 72 billion of Silicon Valley assets at a discount of USD 16.5 billion.

Approximately USD 90 billion in securities and other assets will remain in the receivership for disposition by the FDIC.

After the run on the bank, local regulators closed down the tech lender and put it under the control of the US Federal Deposit Insurance Corporation (FDIC). The FDIC was acting as a receiver, which typically means it would liquidate the bank’s assets to pay back its customers, including depositors and creditors. (ANI)

ALSO READ: Trump grand jury likely to resume session on April 3

Questions remain around why SVB was allowed to double in size after the Fed raised concerns about the bank’s risk management systems….reports Asian Lite News

The US Federal Reserve began sounding the alarm about Silicon Valley Bank’s (SVB’s) risk management arm starting at least four years ago in 2019, according to a report.

In January 2019, the Fed issued a warning known as a ‘Matter Requiring Attention’, a citation a step-down from an enforcement action, about SVB’s risk-management systems, The Wall Street Journal reported, citing documents from a presentation circulated last year to employees of SVB’s venture-capital arm.

The presentation reportedly said the Fed again warned SVB in 2020 that its system to control risk did not meet the expectations for a large financial institution, or a bank holding company with more than $100 billion in assets. The bank at that time was in a period of rapid growth as deposits flooded in at the early onset of the Covid-19 pandemic, Fox Business reported.

According to the Journal, the presentation notes that SVB’s average level of interest-earning assets grew 76% in the first quarter of 2021, compared with the same period one year earlier.

Federal Deposit Insurance Corp. data show SVB’s assets grew to $114 billon at the end of 2020, up from the bank’s $70 billion in 2019 � the year the Federal Reserve first raised eyebrows.

SVB had nearly twice as much in assets from 2020 to the end of 2021, clocking in at about $209 billion, Fox Business reported.

Questions remain around why SVB was allowed to double in size after the Fed raised concerns about the bank’s risk management systems. A Federal Reserve review of its oversight of SVB is due by May.

First Republic continues tanking

Shares in the troubled First Republic Bank crashed more than 46 per cent after reports the San Francisco-based bank may need to raise more funds despite a $ 30 billion rescue last week.

As the growing banking crisis spread into a new week, the credit rating of the regional bank was downgraded deeper into junk status by S&P Global, the Guardian reported.

The agency said that the bank, which caters to wealthy clients, probably faced “high liquidity stress with substantial outflows”.

US officials are studying how to temporarily expand the protection offered to banking customers by Federal Deposit Insurance Corp (FDIC) to include all deposits, going beyond the current $250,000 cap, Bloomberg reported.

Like the collapsed Silicon Valley Bank (SVB), a large proportion of First Republic’s customers hold more than the $250,000 amount guaranteed by federal insurance.

However, the move may face political roadblocks.

Hardline Republicans in the House of Representatives on Monday vowed to oppose any cover extension, the Guardian reported.

The Republican House Freedom Caucus said in a statement: “Any universal guarantee on all bank deposits, whether implicit or explicit, enshrines a dangerous precedent that simply encourages future irresponsible behavior to be paid for by those not involved who followed the rules.”

First Republic’s woes follow the collapse of SVB and New York-based Signature. Over the weekend Credit Suisse became the largest institution so far to be embroiled in the upheaval when the Swiss government forced the troubled bank into a cut-price takeover by rival UBS.

First Republic has struggled to reassure depositors that it will not suffer the same fate as SVB and Signature.

ALSO READ: US raises concern over rights abuses in China, Pak