FDIC To Break Up Silicon Valley Bank

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

According to Reuters, the FDIC will seek bids for Silicon Valley Private Bank until March 22 and for the bridge bank until March 24. The private bank, which is housed within SVB’s retail operations, caters to high net-worth individuals.

First Citizens BancShares Inc, one of the biggest buyers of failed U.S. lenders, has submitted a bid for all of Silicon Valley Bank, one source with knowledge of the matter said. If the FDIC decides to receive bids for parts of SVB, First Citizens also expected to bid. Bloomberg reported earlier on their interest on SVB.

The FDIC posted a press release on Monday titled: “FDIC Extends Bid Window For Silicon Valley Bridge Bank, N.A.” from the press release:

“The Federal Deposit Insurance Corporation (FDIC) has extended the bidding process for Silicon Valley Bridge Bank, National Association, Santa Clara, California. There has been substantial interest from multiple parties, and the FDIC and the bidders need more time explore all options in order to maximize value and achieve an optimal outcome.

To help simplify the bidding process and expand the pool of potential bidders, the FDIC will allow parties to submit separate bids for Silicon Valley Bridge Bank, N.A., and its subsidiary Silicon Valley Private Bank. Qualified, insured banks, and qualified, insurance banks in alliance with non-bank partners, will be able to submit whole-bank bids or bids on the deposits or assets of the institutions. Bank and non-bank financial firms will be permitted to bid on the asset portfolios…

…In the meantime, Silicon Valley Bridge Bank, N.A., continues to operate as a nationally chartered bank. Depositors will continue to have full access to all of their money through Silicon Valley Bridge Bank, N.A., which operates 17 branches in California and Massachusetts, and through online banking, ATM and debit card, and by writing checks. Loan customers should continue making loan payments as usual.

Vendors and counterparts with contracts with the bridge bank are legally obligated to continue to perform under the contracts. Silicon Valley Bridge Bank, N.A., has the full ability to make timely payments to vendors and counterparties and otherwise perform its obligations under the contract…”

PBS reported that the bidding process for the successor of Silicon Valley Bank is being extended by the Federal Deposit Insurance Corp. to give more time to work out a potential deal.

According to PBS, on Friday the parent of Silicon Valley Bank filed for Chapter 11 bankruptcy protections. SVB Financial Group is no longer affiliated with Silicon Valley Bank after its seizure by the FDIC. Its collapse was the second biggest bank failure in U.S. history after the demise of Washington Mutual in 2008.

In my opinion, it will be interesting to find out which companies decide to bid on SVB, and which one the FDIC will select as its new owner.