SVB to be broken up and sold in two auctions

THE Federal Deposit Insurance Corporation (FDIC) on Monday (Mar 20) decided to break up Silicon Valley Bank (SVB) and hold two separate auctions for its traditional deposits unit and its private bank, after failing to find a buyer for the failed lender last week.

It will seek bids for the bridge bank until Mar 24. For Silicon Valley Private Bank, which is housed within SVB’s retail operations and caters to high-net-worth individuals, the FDIC will seek bids until Mar 22. Bank and non-bank financial firms will be allowed to bid on the asset portfolios, the regulator said.

Last week, sources told Reuters that the FDIC was planning to relaunch the sale process for SVB, and that the regulator was seeking a potential break-up of the failed lender.

On Friday, the parent company of the lender, SVB Financial Group, filed for a reorganisation under Chapter 11 bankruptcy protection and sought buyers for its assets. This came after steps to shore up investor confidence failed. The FDIC, which insures deposits and manages receiverships, told the banks which were mulling offers in the auctions for SVB and Signature Bank that it was considering retaining some of the assets that are underwater.

Reuters reported on Sunday that the efforts of some US regional banks to raise capital and allay fears about their health are running up against concerns from potential buyers and investors about looming losses in their assets.

The run on SVB was sparked by balance-sheet concerns after it sold a portfolio of treasuries and mortgage-backed securities to Goldman Sachs at a US$1.8 billion loss, then attempted to plug that hole through a US$2.25 billion fundraising. REUTERS