First Citizens BancShares is buying the assets and loans of Silicon Valley Bank (SVB), a US bank that went out of business.
When SVB went bankrupt earlier this month, people worried about the safety of other lenders. This made bank shares fall sharply around the world.
In Europe, people worried about the strength of the big Swiss bank Credit Suisse sped up a deal for rival UBS to buy it.
Even though bank stocks opened higher on Monday, the markets have stayed nervous.
Shares of Deutsche Bank, which is based in Germany, fell by 14% at one point on Friday before making some gains. On Monday, when trading started, they went up by about 3%.
After a run on the bank earlier this month, US regulators took over SVB. Soon after, another US bank, Signature Bank, went out of business.
The failure of these two banks was the biggest in the US since the 2008 financial crisis.
The US Federal Deposit Insurance Corporation (FDIC) announced that SVB would be taken over, and on Monday, all 17 former SVB branches will open as First Citizens branches.
Customers of SVB are being told to keep using their current branch until they hear from First Citizens Bank that their account has been completely moved over.
First Citizens is based in Raleigh, North Carolina, and says it is America’s largest bank that is owned and run by a single family. In the past few years, it has been one of the biggest buyers of banks in trouble.
It bought about $72 billion in loans and assets from SVB at a discount of $16.5 billion. About $90 billion of SVB’s assets will still be owned by the FDIC.
The FDIC said that if SVB went bankrupt, it would cost its deposit insurance fund about $20bn.
HSBC bought the UK branch of SVB earlier this month for £1.
Rates could go up.
During the global financial crisis of 2008 and again during the Covid pandemic, central banks around the world cut interest rates sharply in an effort to boost economic growth.
But over the past year, rates have been going up as central banks try to stop prices from going up too fast.
The value of the investments that banks keep some of their money in has gone down because of these rate hikes. This has contributed to the failure of US banks.
The financial markets are worried that there could be more problems in the banking sector that haven’t shown up yet.
Central banks all over the world have said that the banking system is safe and that lenders have enough money to cover their costs.
Sarah Hewin, who is in charge of research for Europe and the Americas at Standard Chartered bank, said on the BBC’s Today show that investors are in a “very febrile environment.”
“Right now, markets are being driven more by psychology than by reality.”
Kristalina Georgieva, who is in charge of the International Monetary Fund, said on Sunday that there was a “need for vigilance” in the banking sector and that it was “clear that risks to financial stability have increased.“
“At a time when people have a lot of debt, the sudden change from a long period of low interest rates to rates that are much higher… creates stress and vulnerabilities.”
