A North California-based First citizen bank is the new knight in shiny armour as it sets to acquire Silicon Valley bank.

The announcement which was made on March 26 by the Federal Deposit Insurance Corporation, explains  that from today, March 27, 17 of the former branches of Silicon Valley bank will open as First Citizen Bank & Trust Company.

According to FDIC in a statement “In today’s deal, assets belonging to Silicon Valley Bridge Bank, National Association worth about $72 billion were bought at a $16.5 billion discount.”

However, the management board of Silicon Valley said that current bank branches will be used until notice is served by the new management, toward ensuring a total and smooth transition.

As of March 10, the North Carolina-based bank had $167 billion in total assets and $119 billion in deposits, ranking it as the 30th largest commercial bank in the nation.

What happened to Silicon Valley?

A bank run that was initiated on March 10 by claims of a significant liquidity issue at the institution led to Silicon Valley Bank’s failure.

The failure was attributed to COVID-19 pandemic’s higher deposits than credit, which led to asset-liability mismatches. As a result, banks used their liquidity in public and private sector bonds excessively. The FDIC was then appointed receiver of the bankrupt bank, and it attempted to sell the institution at auction.

In the course of the process, two separate auctions for SVB’s assets were held, one for the company’s ordinary deposits department and another for the private bank, a portion of its retail operations that specialized to high-net-worth individuals.

Meanwhile, Securities and other assets worth a total of $90 billion will continue to be in receivership for the FDIC to sell. In addition, the FDIC received equity appreciation rights on First Citizens BancShares, Inc. common stock with a maximum estimated value of $500 million.

It was thought that a number of businesses had either made offers for the failing American bank or were preparing to do so.

Bloomberg claims  that on March 18th, First Citizens started putting together an SVB bid. Three days later, it reportedly made an offer for the whole SVB. At the time, a First Citizens officials opted  not to respond to market rumors or speculation.

Implication to Customers

Given that First Citizen Bank has a solid reputation for offering cutting-edge financial solutions, the acquisition will probably result in better banking services and products for Silicon Valley Bank customers.

On the other hand, this acquisition will increase First Citizen Bank’s market share in Silicon Valley, and could lead to more business opportunities for bank clients.

Final Note

The acquisition process between these two financial giants is good news to customers. With First Citizen Bank as the lead key player, this signifies a new change, improved banking services and continued commitment to innovation and growth in the American banking industry. The salvage of what is left of the former bank will also have far reaching effect on investors.