Silicon Valley Bank to Be Acquired by First Citizens After Biggest US Bank Collapse Since 2008

US bank First Citizens said Monday it has agreed to purchase all loans and deposits from Silicon Valley Bank, whose collapse this month sparked global fears about the sector.

SVB, a key lender to the tech industry since the 1980s, became the biggest US bank to fail since 2008 when regulators seized it after a sudden run on deposits.

Regulators created Silicon Valley Bridge Bank from SVB after the collapse, and that entity will be taken over by First Citizens from Monday.

First Citizens said it had agreed to purchase “substantially all loans and certain other assets, and assume all customer deposits and certain other liabilities of Silicon Valley Bridge Bank.”

“The transaction is structured as a whole bank purchase with loss share coverage,” it said in a statement.

It said the 17 former branches of SVB will open on Monday as “Silicon Valley Bank, a division of First Citizens Bank.”

The US Federal Deposit Insurance Corporation (FDIC) said Sunday the transaction covers $119 billion (roughly Rs. 9,80,200 crore) in deposits and $72 billion (roughly Rs. 5,93,000 crore) in assets.

Depositors of SVB will “automatically become depositors of First Citizens Bank,” added the FDIC, which will continue to insure deposits.

Along with the FDIC, the United States Treasury and Federal Reserve had set out plans to ensure SVB customers would be able to access their deposits, while the Fed introduced a new lending tool for banks in an effort to prevent a repeat of SVB’s quick demise.

SVB’s collapse sparked a crisis of confidence among the customers of similarly sized US banks, with many withdrawing their money and depositing it into bigger institutions seen as too big for the government to not bail them out in a crisis.

The turmoil also spread to Europe, where troubled Swiss lender Credit Suisse was taken over by UBS.

Most recently, shares in long-troubled Deutsche Bank fell heavily on Friday on the lender’s surging cost of default cover, reigniting fears about a widening banking sector crisis.

Despite global contagion fears, central banks have pushed on with monetary tightening as they focus on fighting inflation — even though the troubles in the banking sector have been linked to their rate hikes.


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TCS, Infosys Have Highest Exposure to US Regional Banks, Says JP Morgan After SVB Collapse

Top Indian information technology firms Tata Consultancy Services and Infosys have the highest exposure to regional banks in the United States that are gripped by a financial turmoil, analysts at JP Morgan said on Friday.

Regional banks in the United States account for 2-3 percent of their revenue, JP Morgan said in a note, adding that the exposure to the recently collapsed Silicon Valley Bank could be 10-20 basis points for TCS, Infosys and smaller rival LTIMindtree, with the Tata group company in the lead.

All three companies might need to set aside provisions in the fourth quarter due to their exposure to SVB, JP Morgan said in a note.

“The collapse of SVB, Signature Bank and concerns of liquidity across US and the European Union can further soften tech spends by banks over the short term in a year with slowing growth in bank tech budgets,” JP Morgan, which has an “underweight” rating on the sector, said.

India’s IT industry is already facing a challenging macroeconomic environment in its key markets of Europe and the United States, where technology spending is contracting amid delays in decision-making on long-term deals as the pandemic-led surge in demand faded.

The banking crisis could delay deal ramp-ups, impacting revenue conversions over the next two quarters, and push back new order closures that could hurt revenue over the next four quarters, JP Morgan said.

Indian IT firms draw the bulk of their revenue from the banking, financial services and insurance (BFSI) sector.

Within BFSI, their exposure to the US banks is on average 62 percent and Europe 23 percent, JP Morgan said.

LTIMindtree this week said it had negligible exposure to US regional banks, including SVB.

© Thomson Reuters 2023


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