FDIC is considering holding loss-making assets of Silicon Valley banks to facilitate the smooth completion of the auction

According to reports, US regulators are considering holding securities under the names of Signature Bank and Silicon Valley Bank that have fallen below their purchase price, a move that will remove one of the possible obstacles to selling these two banks. According to people familiar with the matter, this is a routine practice after the Federal Deposit Insurance Corporation (FDIC) took over the bank, mainly facilitating the conclusion of acquisition transactions. Because if it involves assets with declining value, it will be more difficult to sell the relevant banks. People familiar with the matter said that the relevant asset size of Signature may be between $20 billion and $50 billion, and that of Silicon Valley banks may be between $60 billion and $120 billion. Both Silicon Valley banks and Signature have invested in bonds at low interest rates, and the value of these bonds has plummeted as the Federal Reserve has raised interest rates several times over the past year to cope with soaring inflation.

Interpretation of this information:

US regulators are reportedly considering holding securities under the names of Signature Bank and Silicon Valley Bank, which have fallen below their purchase price. This move will remove a potential obstacle to selling the two banks. It is a routine practice after the Federal Deposit Insurance Corporation takes over a bank to facilitate acquisition transactions, especially in cases where assets have decreasing value. People familiar with the matter say that the Signature Bank’s relevant asset size may be between $20 billion and $50 billion, while that of Silicon Valley Bank may range between $60 billion and $120 billion. Both banks have invested in bonds at low interest rates, the value of which plummeted due to the Federal Reserve’s multiple interest rate hikes over the past year to tackle inflation.