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The SVB Has a Buyer, But Banks Face Default Stress

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The SVB Has a Buyer, But Banks Face Default Stress

(CTN News) – On Monday, a buyer for SVB deposits and loans helped calm fragile markets roiled by credit crunch fears and systemic bank stress.

FDIC said First Citizens Banc Shares Inc bought all the loans and deposits of SVB and gave it equity appreciation rights worth $500 million in return.

First Citizen will open 17 former SVB branches on Monday.

About $72 billion in assets are acquired from SVB by First Citizen at a discount of $16.5 billion, and the estimated cost to the FDIC is $20 billion.

It was the first weekend without news of fresh bank collapses, rescue deals or government action to boost confidence.

IG Mark FDIC said First Citizens BancShares Inc bought all the loans and deposits of SVB and gave it equity appreciation rights worth $500 million in return.

First Citizen will open 17 former SVB branches on Monday.

About $72 billion in assets are acquired from SVB by First Citizen at a discount of $16.5 billion, and the estimated cost to the FDIC is $20 billion.

It was the first weekend without news of fresh bank collapses, rescue deals or government action to boost confidence.

IG Markets analyst Tony Sycamore stated, “It’s good to see Silicon Valley go to another buyer, but the bigger issue is guaranteeing deposits at the other regional banks.”

The week ended with financial market stress flashing and Germany’s largest lender Deutsche Bank in week ended with financial market stress flashing and Germany’s largest lender Deutsche Bank in the crosshairs, with shares falling 8.5% on Friday and bond insurance costs rising.

Hong Kong shares of Standard Chartered fell 4% on Monday, while Australian and Tokyo bank shares held steady. In Europe, futures rose 1% and 0.5%, respectively.

The UK division of SVB is purchased by HSBC

US depositors have fled smaller banks to larger cousins since SVB collapsed two weeks ago, which forced Credit Suisse to merge with rival UBS last week due to a hit to confidence.

In March, the shares of the regional bank KBW have lost 21%, leaving investors on edge about what is in store for them. Shayne Elliott, the chairman and chief executive of Australia and New Zealand Banking Group, said in an interview posted on the bank’s website that the turmoil in the banking sector is “clearly not over.”.

‘Well, that’s all done, Silicon Valley Bank and Credit Suisse, and life will go back to normal'” Elliott said. It takes a while for these things to go through.”

An acronym, a carrot

There are concerns about whether major central banks will continue to hike interest rates aggressively to combat inflation, and whether tightened lending will harm the global economy.

Bank bonds are under pressure in Europe, and credit default swaps are uncomfortably high.

Data from S&P Global Market Intelligence shows Deutsche Bank’s five-year CDS hit its highest level since late 2018.

SVB’s sale may ease depositors’ worries about regional lenders, which have risen by more than $300 billion in the past month to a record atop $5.1 trillion.

SBV Private and SVB were asked for separate offers by the FDIC after several weeks of searching.

Securities worth $90 billion remain with the FDIC for sale.

“You’re going to get carrots, sticks, and acronyms to get the desired outcome and allow (authorities) to use interest rates to combat inflation,” Rabobank strategist Michael Every said.

“This seems to be part of it.”

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