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Regional U.S. lender First Citizens BancShares said it bought failed peer Silicon Valley Bank’s assets on Monday, prompting a relief rally in bank shares and easing worries about systemic stress in the banking sector.

The sudden collapse of tech start-up focused SVB earlier this month triggered the worst banking shock since the 2008 global financial crisis, ensnaring some of Europe’s biggest lenders and raising red flags about the health of the industry.

But signs that SVB’s failure was being resolved by authorities and a weekend free of fresh troubles helped boost confidence, especially among fragile U.S. regional banks, whose stocks rose sharply on Wall Street on Monday.

Broader indicators of financial market stress were also calmer, with government bond yields rising and the euro higher against the dollar.

“The banking sector had been holding its breath over the weekend, wondering whether Monday morning would deliver another bank in need of a rescue,” said Danni Hewson, head of financial analysis at AJ Bell.

“Instead, nerves have been bathed in the soothing balm of certainty as one of America’s largest family banks gobbled up a chunk of Silicon Valley Bank, wiping the name from America’s streets and hopefully from the front of investors’ minds.”

First Citizens BancShares Inc said it bought all the loans and deposits of SVB, giving the Federal Deposit Insurance Corp (FDIC) equity rights in its stock worth as much as $500 million in return.

Helping further calm jitters, the Federal Reserve’s top regulatory official will tell Congress this week that regulators are committed to keeping U.S. bank deposits safe and ready to use their tools for an institution of any size, if needed.

In prepared testimony, Fed Vice Chair for Supervision Michael Barr said the banking system is “strong and resilient” and that the Fed is reviewing its actions before SVB’s collapse as well as how to tighten rules on banks going forward.

Barr’s comments and the First Citizens deal may assuage some concerns from depositors, who of late have been moving funds from regional banks to strategically important institutions that are under stricter federal regulation.

First Citizens said it would take on assets of $110 billion, deposits of $56 billion and loans of $72 billion, and expand in California. The FDIC retains some $90 billion in securities held for disposal.

“We see the sale of SVB to a regional bank as politically helpful to the banks. It allows the industry to argue that large regionals can be resolved without help from the mega banks,” said analysts at TD Cowen.

First Citizens, which also has an agreement to share some potential losses with the regulator, saw its shares soar 51%.

The FDIC estimates SVB’s failure will cost a federal deposit insurance fund used to rescue banks about $20 billion. The fund does not take U.S. taxpayer money and is instead replenished by a levy on the entire banking sector.

The collapse of SVB and New York-based peer Signature Bank has left politicians wary of public perceptions that banks are being bailed out again, after anger over the sector’s costly rescue in 2008.

Signature’s failure cost the FDIC $2.5 billion but had no other direct cost to taxpayers outside of the FDIC, Wells Fargo analysts wrote.

“The bottom line is that the 2nd and 3rd largest bank failures are now resolved,” wrote analysts at Wells Fargo led by Mike Mayo.


The First Citizens deal boosted shares of other smaller regional banks, including First Republic, which has been at the forefront of investors’ minds. Its shares jumped by more than 10% on Monday.

Bloomberg News reported U.S. authorities were in early stage deliberations over expanding emergency lending facilities which could give First Republic Bank more time to shore up its balance sheet.

Regional peers Western Alliance Bancorp and PacWest Bancorp climbing 4% and 2%, respectively. Major U.S. banks JPMorgan Chase & Co, Citigroup and Bank of America advanced between 3% and 4%.

Banking stocks in Europe also rebounded after a torrid previous session. Germany’s biggest lender Deutsche Bank , which had slumped 8.5% on Friday alongside a sharp jump in the cost of insuring its bonds against default, rose 6.2%.

The Stoxx index of top European bank shares is still down more than 17% this month, however, and the U.S. KBW regional bank index has lost 20%, as investors remain on edge about what’s next.


The banking tumult has investors questioning about whether major central banks will continue to pursue aggressive interest rate hikes to tamp down inflation, and whether tightened lending will hurt the global economy.

A U.S. Federal Reserve policymaker said on Sunday that stress in the banking sector is being closely monitored for its potential to trigger a credit crunch, where banks restrict the amount they are willing to lend to consumers and businesses.

Small, concentrated crunches can weigh on growth without bringing the full economy to a standstill. Deeper lending clamp-downs can hobble the economy for years.

Even before the present crisis erupted, bank lending to euro zone companies had slowed for the fourth straight month in February, signaling increased caution from lenders.

In the United States, flows into less risky money market funds have risen by more than $300 billion in the past month to a record atop $5.1 trillion.

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