FDIC considers breaking up Silicon Valley Bank, relaunching sale process: report

Federal regulators are reportedly looking to relaunch nan process for trading Silicon Valley Bank (SVB) and whitethorn look to break up nan failed financial institution aft nan first auction proved unsuccessful successful attracting buyers.

The Federal Deposit Insurance Corporation (FDIC) held an auction for SVB past play aft it grounded amid a slope tally successful nan preceding days, but aft nan banking regulator solicited bids, nary were approved.

Now, nan FDIC is considering an action for moving guardant and relaunching nan auction aft breaking up SVB into astatine slightest 2 components, according to a study by Bloomberg that cited sources acquainted pinch nan matter. 

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The FDIC is reportedly considering breaking up Silicon Valley Bank to entice prospective buyers into acquiring nan grounded firm's assets. (AP Photo/Jeff Chiu / AP Newsroom)

It’s unclear astatine this clip whether nan FDIC will so divided up Silicon Valley Bank, but nan action nether information would impact SVB being divided into 2 entities pinch abstracted auction deadlines.

Under nan imaginable plan, SVB’s backstage slope – which offers services to high-net-worth customers – would beryllium a abstracted entity pinch a Wednesday deadline for it to beryllium auctioned. 

Meanwhile, SVB’s depositary bank, which houses each of its user deposits, would beryllium put up for waste successful a abstracted auction pinch bids owed Friday.

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The FDIC took Silicon Valley Bank into receivership connected March 10, 2023, aft it grounded amid a slope tally and liquidity crunch. (AP Photo/Peter Morgan / AP Newsroom)

Reuters reported that sources acquainted pinch nan scheme cautioned that nan plans could change. Bids for nan entirety of SVB were owed Sunday.

The FDIC has informed banks that are weighing imaginable offers for SVB and Signature Bank, a New York-based patient that grounded soon aft SVB, that nan regulator whitethorn clasp immoderate of nan assets that are underwater astatine nan grounded lenders arsenic a intends of making an acquisition much charismatic to prospective buyers.

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SVB was overexposed to long-dated authorities securities that created important liking complaint consequence arsenic nan Federal Reserve hiked rates to tamp down inflation. 

The value of a enslaved decreases arsenic liking rates rise, truthful SVB had to waste disconnected portions of its bond portfolio astatine a nonaccomplishment to meet its depositors’ demands for withdrawals arsenic their concerns astir nan bank’s semipermanent viability mounted. That, successful turn, exacerbated nan liquidity crunch facing SVB, arsenic much depositors pinch accounts successful excess of nan FDIC's $250,000 headdress connected insured deposits responded by rushing to retreat their funds.

Reuters contributed to this report.