Here’s why the U.S. had to sweeten terms to get the SVB sale done

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The winning bidder in the government's auction of Silicon Valley Bank's main assets received several concessions to make the deal happen.

First Citizens BancShares is acquiring $72 billion in SVB assets at a discount of $16.5 billion, or 23%, according to a Sunday release from the Federal Deposit Insurance Corporation.

But even after the deal closes, the FDIC remains on the hook to dispose of the majority of remaining SVB assets, about $90 billion, which are being kept in receivership.

And the FDIC agreed to an eight-year loss-sharing deal on commercial loans First Citizen is taking over, as well as a special credit line for «contingent liquidity purposes,» the North Carolina-based bank said Monday.

All told, the SVB failure will cost the FDIC's Deposit Insurance Fund about $20 billion, the agency said. That cost will be born by higher fees on American banks that enjoy FDIC protection.

Shares of First Citizens shot up 45% in trading Monday.

The deal terms may be explained by tepid interest in SVB assets, according to Mark Williams, a former Federal Reserve examiner who lectures on finance at Boston University.

The government seized SVB on March 10 and later extended the deadline for its assets. Bidding had come down to First Citizens and Valley National Bancorp, Bloomberg reported last week.

«The deal was getting stale,» Williams said. «I think the FDIC realized that the longer this took, the more they'd have to discount it to entice someone.»

The ongoing sales process for First Republic may have cooled interest in SVB assets, according to a person with knowledge of the process. Some potential acquirers held off on the SVB auction because they hoped to make a bid on First Republic, which they coveted