Large portions of Silicon Valley Bank's deposits and loans found buyers on Monday, which helped stabilize the shaky markets that had been shaken by concerns about a credit crunch and systemic bank stress.
The Federal Deposit Insurance Corp. received equity appreciation rights in First Citizens BancShares Inc.'s stock worth up to $500 million in exchange for purchasing all of SVB's loans and deposits, the FDIC announced in a statement.
On Monday, 17 former SVB locations will become First Citizen locations. First Citizen purchases SVB assets worth roughly $72 billion at a discount of $16.5 billion, while the FDIC estimates that SVB's failure will cost the deposit insurance fund about $20 billion.
First Citizens, a firm situated in North Carolina, stated in a statement that it did not purchase any further loans or assets from SVB Financial Group, the previous parent company of Silicon Valley Bank.
The agreement has provided markets with some relief since it was the first weekend in a number of weeks without reports of new bank failures, rescue agreements, or urgent government assistance to restore trust.
"You sweep Silicon Valley off to another buyer, which is good, but the bigger issue is guaranteeing deposits at all those other (regional) banks," said IG Markets analyst Tony Sycamore in Sydney.
"It's a little bit of calm before the next storm."
The end of last week saw blazing signs of financial market stress, with Germany's largest lender Deutsche Bank in the sights as its shares fell 8.5% on Friday and the price of bond default insurance increased significantly.
Asia's bank shares were divided on Monday, remaining stable in Australia and Tokyo but falling in Hong Kong, where shares of Standard Chartered sank 4%.
European futures increased 1%, while S&P 500 futures increased 0.5%.
Little more than two weeks after SVB's collapse, the effects can be felt all over the world. U.S. depositors are moving to larger cousins from smaller cousins as a result of the confidence blow, and Credit Suisse this week was obliged to join rival UBS.
Investors are on edge as the Stoxx index of European bank shares is down more than 18% and the KBW regional bank index in the United States is down 21% in March.
"It's clearly not over," Australia and New Zealand Banking Group Chief Executive Shayne Elliott said in an interview posted to the bank's website, where he said the turmoil has the potential to escalate into a bigger financial crisis.
"I don't think you can sit here and say, 'Well, that's all done, Silicon Valley Bank and Credit Suisse and, you know, life will go back to normal,'" Elliott said. "These things tend to roll through over a long period of time."
Questions have been raised about whether major central banks will continue to pursue aggressive interest rate hikes to control inflation and whether tighter lending will harm the global economy in light of the abrupt increase in tensions for banks.
Credit default swaps, or the price of insurance against defaults, are uncomfortably high in Europe and bank bonds are under pressure. Data from S&P Global Market Intelligence showed that on Friday, Deutsche Bank's five-year CDS reached its highest level since late 2018.
Focus is on depositors' confidence in regional bankers, which may be harmed by an SVB sale. In the US, where money market fund flows have increased by more than $300 billion in the past month to a record high $5.1 trillion, this confidence has increased significantly.
After searching for a buyer for several weeks and the FDIC requesting separate offers for SVB Private and SVB, the SBV sale finally materialized.
The FDIC still has securities for sale worth almost $90 billion, according to the report. First Citizens stated that it plans to expand in California more quickly and wants to build on SVB's venture capital operation.
"Effectively you're going to get a combination of carrots, sticks, and acronyms in order to ensure you get the outcome you want and that allows (authorities) to still use interest rates to combat inflation," Rabobank strategist Michael Every said.
"This seems to be part and parcel of that."
(Source:www.cnbc.com)
The Federal Deposit Insurance Corp. received equity appreciation rights in First Citizens BancShares Inc.'s stock worth up to $500 million in exchange for purchasing all of SVB's loans and deposits, the FDIC announced in a statement.
On Monday, 17 former SVB locations will become First Citizen locations. First Citizen purchases SVB assets worth roughly $72 billion at a discount of $16.5 billion, while the FDIC estimates that SVB's failure will cost the deposit insurance fund about $20 billion.
First Citizens, a firm situated in North Carolina, stated in a statement that it did not purchase any further loans or assets from SVB Financial Group, the previous parent company of Silicon Valley Bank.
The agreement has provided markets with some relief since it was the first weekend in a number of weeks without reports of new bank failures, rescue agreements, or urgent government assistance to restore trust.
"You sweep Silicon Valley off to another buyer, which is good, but the bigger issue is guaranteeing deposits at all those other (regional) banks," said IG Markets analyst Tony Sycamore in Sydney.
"It's a little bit of calm before the next storm."
The end of last week saw blazing signs of financial market stress, with Germany's largest lender Deutsche Bank in the sights as its shares fell 8.5% on Friday and the price of bond default insurance increased significantly.
Asia's bank shares were divided on Monday, remaining stable in Australia and Tokyo but falling in Hong Kong, where shares of Standard Chartered sank 4%.
European futures increased 1%, while S&P 500 futures increased 0.5%.
Little more than two weeks after SVB's collapse, the effects can be felt all over the world. U.S. depositors are moving to larger cousins from smaller cousins as a result of the confidence blow, and Credit Suisse this week was obliged to join rival UBS.
Investors are on edge as the Stoxx index of European bank shares is down more than 18% and the KBW regional bank index in the United States is down 21% in March.
"It's clearly not over," Australia and New Zealand Banking Group Chief Executive Shayne Elliott said in an interview posted to the bank's website, where he said the turmoil has the potential to escalate into a bigger financial crisis.
"I don't think you can sit here and say, 'Well, that's all done, Silicon Valley Bank and Credit Suisse and, you know, life will go back to normal,'" Elliott said. "These things tend to roll through over a long period of time."
Questions have been raised about whether major central banks will continue to pursue aggressive interest rate hikes to control inflation and whether tighter lending will harm the global economy in light of the abrupt increase in tensions for banks.
Credit default swaps, or the price of insurance against defaults, are uncomfortably high in Europe and bank bonds are under pressure. Data from S&P Global Market Intelligence showed that on Friday, Deutsche Bank's five-year CDS reached its highest level since late 2018.
Focus is on depositors' confidence in regional bankers, which may be harmed by an SVB sale. In the US, where money market fund flows have increased by more than $300 billion in the past month to a record high $5.1 trillion, this confidence has increased significantly.
After searching for a buyer for several weeks and the FDIC requesting separate offers for SVB Private and SVB, the SBV sale finally materialized.
The FDIC still has securities for sale worth almost $90 billion, according to the report. First Citizens stated that it plans to expand in California more quickly and wants to build on SVB's venture capital operation.
"Effectively you're going to get a combination of carrots, sticks, and acronyms in order to ensure you get the outcome you want and that allows (authorities) to still use interest rates to combat inflation," Rabobank strategist Michael Every said.
"This seems to be part and parcel of that."
(Source:www.cnbc.com)