Silicon Valley Bank takeover confirmed but investors ‘fragile’

Earlier this month, Silicon Valley Bank collapsed after multiple organisations withdraw their money from the financial institution for the tech industry. Stocks in various companies took a hit following these developments, however, First Citizens Bank has intervened which has relieved investing anxieties.

After the news that First Citizens Bank is buying SVB’s assets and loans, shares in the bank rose by 50 percent.

This deal, which was brokered by the Federal Deposit Insurance Corporation (FDIC), represents the second acquisition of a failed bank in recent weeks

As part of the Silicon Valley Bank deal, former SVB branches will be brought under the First Citizens brand.

All customers of Silicon Valley Bank customers are being told to continue using their current branch until they receive further notice their account has been transferred.

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Despite investors appearing to be placed, experts are warning that sentiment continues to be “fragile” for the foreseeable future.

Speaking to, Giles Coghlan, the chief market analyst for consulting at HYCM, noted further disruption in the banking sector could lead investors “vulnerable”. 

He explained: “The Federal Deposit Insurance Corporation brokered the takeover deal for SVB, which is significant because, in deciding the path of US interest rates, the Fed is balancing banking sector strains with high inflation. 

“As such, the latest takeover news is positive for sentiment as it shores up investor confidence that banking contagion is less likely to spread through the wider economy as it did during the Global Financial Crisis. 

“This is gently supportive for stocks because it reduces the threat of rapid stock selling, but sentiment remains fragile and particularly vulnerable to any fresh negative banking news that may emerge.”

Why did Silicon Valley Bank collapse?

Over the last couple of years, companies banking with SVB had seen their deposits invested into bonds.

This is usually considered a reliable investment, however, this changed with the Federal Reserve opting to raise interest rates in a bid to rein in inflation.

A consequence of this is that the overall value of bonds went down which resulted in businesses being concerned about the security of their despots with Silicon Valley Bank.

As such, companies withdrew their money from SVB which led to the bank attempting to sell its bonds.

As such, companies withdrew their money from SVB which led to the bank attempting to sell its bonds.

After two days of announcing it would be selling bonds, SVB collapsed on March 10, 2023.

The FDIC was appointed as the receiver after regulators in California shut down Silicon Valley Bank.

In a statement, the body stated: “All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023.

“The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds.

“As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.”

According to the FDIC, First Citizens had purchased around $72billion (£58.3billion) of SVB’s assets at a discount of $16.5billion (£13.3billion).

This deal will make the family-run bank one of the 25 biggest financial institutions in the United States.

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