May 31, 2023

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FDIC to dismantle SVB, and seek to sell separate private unit

March 20 (Reuters) – The Federal Deposit Insurance Corporation decided on Monday to break up a Silicon Valley bank (SVB) and hold separate auctions for its traditional depository unit and its private bank after failing to find a buyer for the failed lender last week.

It will seek bids for the Silicon Valley private bank through March 22 and for the bridge bank through March 24. The private bank, which is within SVB’s retail operations, caters to high net worth individuals.

The regulator said bank and non-bank financial firms would be allowed to bid on portfolios of assets.

One of the sources familiar with the matter said that First Citizens BancShares Inc (FCNCA.O), one of the largest buyers of failed US lenders, has made an offer to buy out the entire Silicon Valley bank. If the FDIC decides to receive bids for parts of the SVB, First Citizens can also expect to submit a bid. Bloomberg previously reported interest in SVB.

First Citizens said in a statement that it “does not comment on market rumor or speculation.”

Last week, sources told Reuters that the FDIC intends to relaunch the sale of SVB, with the regulator seeking a possible break-up of the failed lender.

The parent company of financial group SVB Financial on Friday filed for reorganization under Chapter 11 bankruptcy protection and sought buyers for its assets after steps to boost investor confidence failed.

The Deposit Insurance Corporation, which insures deposits and operates custody, has told banks considering bids in auctions for SVB and Signature Bank (SBNY.O) that it is considering holding some underwater assets.

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Reuters reported on Sunday that efforts by some regional US banks to raise capital and quell concerns about their health collided with concerns of potential buyers and investors about looming losses in their assets.

The bank run was sparked by balance sheet concerns after the lender sold a portfolio of Treasury and mortgage-backed securities to Goldman Sachs (GS.N) at a loss of $1.8 billion and then attempted to bridge the gap with a $2.25 billion fundraiser.

Reporting by Manya Saini in Bengaluru; Editing by Aaron Kuyor and Nick Zieminski

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