The Federal Deposit Insurance Corporation announced Monday it is allowing more time for potential suitors to purchase the successor of failed Silicon Valley Bank, after splitting the lender into two separate entities.
The agency said in a press release it is extending the bidding process for Silicon Valley Bridge Bank, N.A., until Friday at 8:00 p.m. EDT, reporting that "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 also spun off SVB's private bank for high-net-worth customers, Silicon Valley Private Bank, and has set a Wednesday evening deadline for bids to purchase the entity.
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Bids will be considered from qualified, insured banks which may also introduce offers in alliance with nonbank partners either for buying the entities outright or for purchasing the deposits or assets of the institutions. Bids for the banks' respective asset portfolios will be entertained from both bank and non-bank financial firms, the FDIC said.
The FDIC set up Silicon Valley Bridge Bank on March 13, after taking control of SVB after its seizure by California regulators amid a bank run on the institution March 10. The agency launched an auction to sell the institution last weekend, and set the original bid deadline for Sunday.
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The FDIC has informed banks that are weighing potential offers for SVB and Signature Bank — a New York-based firm that failed shortly after SVB — that the regulator may retain some of the assets that are underwater at the failed lenders as a means of making an acquisition more attractive to prospective buyers.
SVB was overexposed to long-dated government securities that created substantial interest rate risk as the Federal Reserve hiked rates to tamp down inflation.
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The price of a bond decreases as interest rates rise, so SVB had to sell off portions of its bond portfolio at a loss to meet its depositors’ demands for withdrawals as their concerns about the bank’s long-term viability mounted. That, in turn, exacerbated the liquidity crunch facing SVB, as more depositors with accounts in excess of the FDIC's $250,000 cap on insured deposits responded by rushing to withdraw their funds.