Securing Silicon Valley Bank’s future has taken time, but with the help of $20bn (£16.7bn) in funds from the federal insurance scheme, it has succeeded.
The buyer is fast-growing North Carolina-based First Citizens Bancshares, a family-controlled lender.
It acquires all of the SVB’s loans, deposits and affiliates, but leaves $90 billion in securities, whatever they may be, with the authorities.
There is a pattern in US bank rescues as healthier institutions see opportunities with SVB and Signature. Interviewed on CNBC, First Citizens chairman Frank Holding was delighted, arguing that his bank is a specialist in relationship banking.
Salvation: North Carolina-based First Citizens Bancshares takes over SVB loans, deposits, and branches, but leaves $90 billion in securities, whatever they may be, with authorities
That will be necessary to retain Silicon Valley’s wealthiest technology companies and individuals as customers.
Still uncertain is the fate of the San Francisco-based First Republic. The shares of the 14th largest lender went up and down like a yo-yo.
A large portion of the First Republic’s deposits are uninsured (more than $250,000). A potential run was stabilized when a posse busted by JP Morgan brought in $30 billion in deposits.
The future of First Republic as an independent bank is still uncertain. Investment bankers have been brought in to advise, dividends have been suspended, and regulators are looking into sales by executives, including the founders, of millions of dollars in company stock in the two months before the crisis.
Shares, which traded at $147 earlier this year, are changing hands at $14.30. Bonds are heavily discounted from face value.
The ultimate fate of First Republic is unknown. A common thread running through this year’s banking crisis is the determination of authorities on both sides of the Atlantic to find safe havens for the assets.
SVB in the UK has been absorbed by HSBC. Signature has been bought by New York Community Bancorp and Credit Suisse by its bigger rival UBS.
In an effort to get rid of failing banks, the US Federal Deposit Insurance Corporation has shown a willingness to absorb losses.
The flight to safety continues with Goldman Sachs, JP Morgan and Fidelity among the biggest winners with their US money market funds – invested largely in short-dated US Treasuries – raising $286bn (£238bn) so far in March.
That is not a vote of confidence in the banking system.
Small victories
The backbone of the UK economy is made up of small businesses. So it’s hard to ignore the latest survey showing how they are suffering from post-Brexit customs issues.
The Federation of Small Businesses (FSB) warned that rising costs and goods shortages are major concerns for the industry, along with excessive customs paperwork.
It found that one in ten small businesses have stopped international trade in the past five years due to customs and other burdens.
That’s certainly not a great headline and the kind of song people cling to who still regret the UK leaving the EU.
However, if you turn the research on its head, it can be considered positive: nine out of ten companies are adapting to the new situation, even at a price.
A friend in the natural beauty industry is doing well and has set up logistics arrangements in the Netherlands.
When Britain joined the Common Market in 1975, there were loud complaints from the trade about having to comply with Brussels standards.
Many issues – which the FSB identifies, including increased costs, supply chain and logistics – are as much related to Covid-19 and Ukraine as they are to the EU.
A ‘Single Trade Window’ to facilitate small business trade with Europe would be great as it is still the most critical export market.
With Northern Ireland almost done and dusted off, there should be some optimism that the remaining border blockades can be eased.
Disappearing act
A real concern for micro and smaller businesses is bank closures, with Barclays adding another 14 branches to its 2023 closure list of 55.
The closure of branches from Llandeilo in Wales to Cambridge condemns customers to using already overloaded post office counters or waiting for a mobile van or pod (whatever that may be) to hop on.
Disappearing bank branches are also damaging struggling high streets and driving consumers seeking services to fringe, less reliable players.
As interest rates rise, borrowers and savers need more customer service—not less.
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