After issuing a ban on Silicon Valley Bank's (SVB) Branch in Germany on disposals and payments seven days ago, the German Federal Financial Supervisory Authority, BaFin, granted authorization to conduct lending and proprietary business to Silicon Valley Bridge Bank N.A. in the country via its new SVB Germany branch.
Silicon Valley Bank Changes Its German Subsidiary
According to BaFin's statement published on Monday, the entirety of Silicon Valley Bank Germany Branch's business operations has been assumed by SVB Germany. Following BaFin's order of a moratorium on the Silicon Valley Bank Germany Branch on 13 March 2023, SVB Germany remains unaffected by this measure.
SVB GERMANY IS PERMITTED TO OPERATE BY THE GERMAN REGULATOR BAFIN.
— Breaking Market News (@financialjuice) March 20, 2023
Last week, the Office of the Comptroller of the Currency (OCC) granted Silicon Valley Bridge Bank N.A. authorization to conduct banking business, which paved the way for the bank to apply for regulatory approval for its new branch, SVB Germany.
Although the former Silicon Valley Bank was closed by regulators, the Federal Deposit Insurance Corporation (FDIC) created a new 'bridge bank' designed to protect SVB's depositors. The creation of Silicon Valley Bridge Bank N.A. has allowed the FDIC to establish a new branch in Germany and apply for its authorization so that local customers can access their funds.
A bridge bank refers to an institution that has been granted permission by a national regulator or central bank to take over the operations of an insolvent bank temporarily until a buyer can be identified. The primary responsibility of a bridge bank is to safeguard the assets and liabilities of the failed bank and to ensure their uninterrupted operation until the institution becomes solvent once again.
SVB Germany serves as a branch of US-based Silicon Valley Bridge Bank N.A. The original Silicon Valley Bank, based in Santa Clara, California, USA, transferred its equity, assets, and liabilities to this bridge bank, forming SVB Germany.
Having commenced operations in 2018, Silicon Valley Bank Germany Branch offered lending services to local consumers, though it did not offer deposit services. According to BaFin, the branch was not considered systemically significant, meaning that its hypothetical failure would not pose a threat to the financial stability of the local monetary system. From now on, the unit's activities banned by BaFin will be continued by a new-old branch under the name SVB Germany.
From SVB to Credit Suisse
The collapse of SVB in March cast black clouds over the financial markets, and investors began to wonder if a Lehman Brothers 2.0 scenario may materialize. As it turned out, the fears were not unfounded, as the uncertainty spilled over into global bank stocks, pushing Swiss giant Credit Suisse to historic lows.
Credit Suisse's problems escalated rapidly, leading to the troubled bank being taken over by another major institution, UBS. According to news reports from Sunday, UBS will pay CHF 3 billion to buy the lender and take up to $5.4 billion in losses. The transaction is expected to be finalized by the end of 2023.
UBS just offered to acquire Credit Suisse, $CS, for $1 billion.
— The Kobeissi Letter (@KobeissiLetter) March 19, 2023
This means that $CS shareholders would be paid $0.27 per share.
An 87% DISCOUNT to the $2.01 closing price on Friday.
This is either the biggest lowball offer of all time or Credit Suisse is in serious trouble.
While the deal, supported by Swiss regulators, was about to stabilize the country's potential banking crisis, it pushed global markets into downward spirals on Monday. Credit Suisse shares lost 55%, and UBS lost over 5%. This was also reflected in the broad European equity market, where the STOXX 600 index opened on Monday with a loss of more than 3.2% and tested this year's lows. Ultimately, the session ended on a positive note, and Tuesday seems to show that the market has digested the takeover news. Traders are now impatiently awaiting Wednesday's Federal Reserve interest rate decision.
