US FDIC weighs backstop on bank auctions to attract smaller competitors

(Reuters) – US regulators are considering retaining ownership of Signature Bank and Silicon Valley Bank securities to allow smaller banks to participate in the auction for the collapsed lenders, a source familiar with the matter said on Friday .

The Federal Deposit Insurance Corp (FDIC) move aims to ease bank takeovers and expand the pool of bidders, while ensuring larger banks are not deterred from offering, the source said.

Many of the fixed income securities in which SVB and Signature Bank invested, such as B. Treasury bonds are worth less since the US Federal Reserve raised interest rates. The FDIC, which retains these securities, would ensure that acquirers do not take a loss on them.

Signature Bank and Silicon Valley Bank did not immediately respond to Reuters requests for comment. The FDIC declined to comment.

Bloomberg News first reported on the move on Friday, saying the amount covered at Signature could range from $20 billion to $50 billion, while it could range from $60 billion to $120 billion at Silicon Valley Bank.

Reuters reported Wednesday that FDIC regulators have asked banks interested in acquiring SVB and Signature Bank to submit bids by March 17.

A weekend action by the FDIC to sell SVB collapsed last Sunday after major banks refused to complete such a risky deal quickly.

SVB Financial Group, the parent company of Silicon Valley Bank, earlier Friday filed for a court-supervised reorganization under Chapter 11 bankruptcy protection.

(Reporting by Kanjyik Ghosh in Bengaluru; Additional reporting by Urvi Dugar and Akriti Sharma; Editing by Lincoln Feast)

Copyright 2023 Thomson Reuters.


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