FDIC Is Reportedly Sweetening The Deal For Failed Banks
Reports say that federal regulators are making the deal for two failed banks better.
The Federal Deposit Insurance Corporation (FDIC) is willing to talk about splitting losses if it speeds up the sales of Silicon Valley Bank and Signature Bank, unnamed sources told the Financial Times (FT) on Friday, March 17.
The regulator had ruled out sharing losses before, but is now open to the idea after trying to sell Silicon Valley Bank last weekend and getting only one bidder and an offer that the FDIC turned down. The bidder was not from the banking industry.
Loss-sharing agreements are something that the FDIC often offers in sales. Still, some of the deals the regulator made after the financial crisis of 2008 were criticized. The government is worried that if it makes this kind of offer with these sales, it will be seen as a bailout, the report said.
The Wall Street Journal (WSJ) said on Monday, March 13, that the FDIC was going to try to sell Silicon Valley Bank again after the auction didn’t bring in a buyer.
According to a report in the WSJ, FDIC officials told Senate Republicans that the FDIC can offer more incentives to potential buyers now that regulators have said that the failure of the bank would be a threat to the entire financial system. This means that the FDIC can cover all depositors, even those who were not insured.
After one of the biggest bank failures in U.S. history, Silicon Valley Bank’s depositors needed to be paid back.
On the same day, the Financial Times (FT) reported that a group of venture capital firms, including Andreessen Horowitz, General Catalyst, and Khosla Ventures, were trying to get back parts of Silicon Valley Bank.
The Information reported the next day, on March 14, that Apollo Global Management was asking for help with its plan to buy the bank.
But it is said that the FDIC would rather sell it to another bank. The Information reported Wednesday that this would make the change easier for customers and make sure that the buyer meets all regulatory requirements (March 15).
