U.S. regulator seeks sale of Silicon Valley Bank, Signature Bank portfolios-sources

First Citizens Bancshares (Tennessee)

31/03/2023 14:00

By David French and Pete Schroeder
       NEW YORK/WASHINGTON, March 31 (Reuters) - The Federal
Deposit Insurance Corporation (FDIC) has retained advisers to
sell the securities portfolios that the new owners of failed
Silicon Valley Bank and Signature Bank rejected, according to
people familiar with the matter.
    The portfolios are comprised of low-yielding assets, such as
Treasuries and U.S. government agency-backed securities, that
the two regional banks amassed while interest rates were close
to zero.
    If First Citizens Bancshares Inc  FCNCA.O , the new owner of
Silicon Valley Bank, or New York Community Bancorp Inc  NYCB.N ,
which acquired Signature Bank, had assumed the assets, they
would have had to realize losses given that interest rates are
now much higher than the yield of these assets.
    Silicon Valley Bank's and Signature Bank's securities
portfolios carry a face value of around $90 billion and $26
billion, respectively, according to regulatory filings and
statements by government officials.
    The sources spoke on condition of anonymity to discuss
confidential information about the sale process. The FDIC
declined to comment.
    It is unclear how much the FDIC's deposit fund stands to
lose on the sale of the portfolios. The fund, used to guarantee
deposits at failed lenders, is replenished by a levy on all U.S.
banks that are members of the FDIC's deposit insurance scheme.  
    The FDIC estimates the sale of Silicon Valley Bank and
Signature Bank will cost the deposit fund $20 billion and $2.5
billion, respectively. It will release final figures once sales
of the loan books of the banks and their securities portfolios
are complete.
    Some of the loans were passed on to First Citizens and New
York Community with backstops from the FDIC, while others are up
for sale separately. The FDIC has hired Newmark Group Inc
 NMRK.O  to sell about $60 billion of Signature Bank's loans it
retained, Reuters reported this week.
    Silicon Valley Bank gave a sense of the potential losses in
its securities portfolio on March 8, two days before it failed,
when it sold $21.5 billion of it to meet customer withdrawals,
realizing a $1.8 billion loss. The portfolio was yielding an
average 1.79%, far below the 10-year Treasury yield that at the
time was around 3.9%. 

 (Reporting by David French in New York and Pete Schroeder in
Washington, D.C.; Editing by Edwina Gibbs)
 ((davidj.french@thomsonreuters.com;))