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The assets and loans of collapsed US lender Silicon Valley Bank (SVB) are being bought by rival First Citizens BancShares.
Investors welcomed the deal, sending First Citizens shares up more than 40%.
The rise helped drive broader gains in banking shares, which have been in turmoil since SVB’s failure sparked fears over the stability of the sector.
In Europe, worries over the strength of Swiss banking giant Credit Suisse led to a rushed takeover by rival UBS.
The deal for SVB brings to a close a saga that started earlier this month after a run on the bank forced US regulators to take over. Its collapse was swiftly followed by the failure of another US lender, Signature Bank.
The demise of the two were the biggest bank failures in the US since the financial crisis of 2008.
Under the SVB takeover deal, all 17 former SVB branches will open under the First Citizens brand on Monday. SVB customers are being advised to continue using their current branch until they receive notice from First Citizens Bank that their account has been fully moved across.
First Citizens is based in Raleigh, North Carolina and calls itself America’s biggest family-controlled bank. It has been one of the largest buyers of troubled banks in recent years.
The Federal Deposit Insurance Corp, the US financial regulator that announced the deal, said First Citizens had bought around $72bn of SVB’s assets at a discount of $16.5bn – a deal that will make the bank one of the 25 biggest in the US.
The FDIC said it would retain control of about $90bn of SVB’s assets and estimated the cost of the SVB failure to its deposit insurance fund would be about $20bn. It will also receive an equity stake in First Citizens worth up to $500m.
The FDIC said it had received 27 bids from 18 bidders before settling on the First Citizens deal.
The UK arm of SVB was bought by HSBC earlier this month for £1.
Threat of rising rates
Interest rates were cut sharply during the 2008 global financial crisis and again during the Covid pandemic as central banks around the world sought to encourage economic growth.
But rates have been rising over the past year as central banks try to rein in soaring prices.
These rate rises have hit the value of investments that banks keep some of their money in, and contributed to the bank failures in the US.
The worry that has unnerved financial markets is that there could be other problems in the banking sector, which have not yet emerged.
Central banks around the world have stressed that the banking system is safe and lenders are well capitalised.
Sarah Hewin, head of Europe & Americas research at Standard Chartered bank, told the BBC’s Today programme that there is a “very febrile environment” among investors.
“At the moment there’s a lot of psychology rather than reality which is running markets.”
On Sunday, the head of the International Monetary Fund, Kristalina Georgieva, said there was a “need for vigilance” given the turbulence in the banking sector and warned it was “clear that risks to financial stability have increased”.
“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates… inevitably generates stresses and vulnerabilities.”