FDIC buys more time to unload Silicon Valley Bank, plans breakup

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WASHINGTON — The Federal Deposit Insurance Corp. says it will give potential suitors more time to bid for Silicon Valley Bank and will break up the bank, the latest steps in a protracted effort to find a buyer for one of the institutions at the heart of the recent banking panic. 

The FDIC said that it will allow parties to submit separate bids for Silicon Valley Bridge Bank N.A. and its subsidiary Silicon Valley Private Bank. Nonbank firms, as well as banks, will be allowed to bid on the asset portfolios of either institution. Qualified, insured banks can submit whole-bank bids on the deposits or assets. 

The FDIC said that there's been "substantial interest" from multiple parties, and that the bidders "need more time to explore all options in order to maximize value and achieve an optimal outcome."

The agency is in a tough spot to find a buyer for the second largest failed bank in U.S. history, as the list of prospective institutions is low since Silicon Valley Bank is too large for most banks to absorb. Lingering bad memories of arranged acquisitions during the 2008 financial crisis are said to have discouraged bidders, also.

Still, the FDIC on Sunday evening said that Flagstar Bank, a subsidiary of New York Community Bancorp, would buy substantially all the deposits and certain loan portfolios of Signature Bank, which collapsed shortly after Silicon Valley Bank. That deal excludes Signature's digital-assets business; the FDIC will pay out deposits to customers of that unit directly. The digital-assets business includes — but is not necessarily limited to — Signature's crypto-business lines.

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The unusual intervention by regulators last Sunday to declare systemic risk exceptions for Silicon Valley and Signature banks gave the agency more options to find a bidder for both institutions, as a requirement that the FDIC act in the best interest of the Deposit Insurance Fund made it difficult to strike a deal because of the high level of uninsured deposits at the banks. Now that the uninsured deposits are backed by the DIF, it's more in the fund's best interest for the agency to find a successful bidder. 

Bidders now have until 8:00 p.m. Wednesday to make offers for Silicon Valley Private Bank, and until 8 p.m. Friday for Silicon Valley Bridge Bank N.A. 

The FDIC has reportedly received some interest in Silicon Valley Bank's credit business from Apollo Global Management, another tricky proposition for the agency as selling off parts to a nonbank would be unusual. Blackstone has also reportedly discussed making a bid. 

Silicon Valley Bank's failure on March 10 prompted concerns about the balance sheets of similar regional banks. Signature Bank failed two days after Silicon Valley Bank, and First Republic Bank received a $30 billion deposit infusion from a group of larger banks.

The panic has spread beyond U.S. banks: UBS agreed to buy the troubled rival Credit Suisse over the weekend in a shotgun arrangement from Swiss regulators to prevent the banking crisis from spreading further in Europe. 

While Deputy Treasury Secretary Wally Adeyemo has said that deposit stability is returning to regional banks, shares of First Republic fell 12% to $20.24 in early trading Monday after S & P's second downgrade of the company in a week.