The Federal Deposit Insurance Corporation announced Monday that the sale of Silicon Valley Bank would be broken into two parts and extended the deadline for bidding.
The FDIC said that splitting the sale into two parts, with one being SVB’s private bank and the other being its traditional deposits unit, would simplify the process of selling the firm. The move comes just over a week after SVB suddenly failed and was taken over by regulators.
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“There has been substantial interest from multiple parties, and the FDIC and the bidders need more time to explore all options in order to maximize value and achieve an optimal outcome,” the FDIC said. “Qualified, insured banks, and qualified, insured banks in alliance with nonbank 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.”
Bids for SVB’s private bank, which caters to high-wealth depositors, are due by Wednesday, while bidding for the traditional deposits unit is set to close on Friday.
The parent company of SVB filed for bankruptcy in New York on Friday in a move that had been largely expected.
“The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities,” William Kosturos, the chief restructuring officer for SVB Financial Group, said in a statement.
Meanwhile, the fallout from SVB’s collapse is reverberating not only in America’s banking system, but around the world.
Shares of First Republic Bank fell by over 13% shortly after opening on Monday morning following the news that S&P Global has downgraded the credit rating of the bank once again after previously revising it down last week. First Republic has plunged 60% in the last five days alone.
On Sunday, the S&P downgraded First Republic Bank’s credit rating to B+ from BB+. That pushes the bank’s rating further even after the country’s biggest banks deposited $30 million into First Republic to stabilize the firm.
JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Morgan Stanley, and Goldman Sachs all pitched into the effort. The move was done to inspire confidence in the U.S. banking system and the markets more broadly.
Also over the weekend, UBS agreed to buy out fellow Swiss competitor Credit Suisse after the latter was suffering in the wake of SVB’s collapse. Under the terms of the proposed purchase, UBS agreed to purchase Credit Suisse for just over $3 billion, just a fraction of the firm’s estimated value.
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U.S. Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell released a joint statement on the massive purchase, which Credit Suisse is describing as a merger.
“We welcome the announcement by the Swiss authorities today to support financial stability,” they said. “The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient. We have been in close contact with our international counterparts to support their implementation.”
