Scramble to stop the rot at US banks
NEW YORK: US finance authorities have announced a rescue plan that will ensure all depositors at failed Silicon Valley Bank will be able to “fully” retrieve their funds and that American taxpayers will not have to foot the bill.
“Depositors will have access to all of their money starting Monday, March 13,” the US Treasury, the Federal Deposit Insurance Corporation and the US Federal Reserve said in a joint statement following days of scrambling to avert a broader financial knock-on effect with other institutions.
SVB was shut down by regulators on Friday, the biggest bank to fail in the US since the global financial crisis of 2008.
The Bank of England then announced that it intended to put SVB’s British division into insolvency.
“The US banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry,” the US authorities’ joint statement said.
“Those reforms, combined with today’s actions, demonstrate our commitment to … ensure that depositors’ savings remain safe.”
Thousands of companies, many start-ups and tech businesses spent the weekend working out how they would pay their bills in the wake of their bank’s implosion.
The ramifications of SVB’s failure have been felt worldwide and officials on both sides of the Atlantic have moved to limit the fallout.
Some entrepreneurs and investors warned that other regional banks would be hit if companies lost confidence in smaller financial institutions.
Customers took fright when the bank revealed on Wednesday it had suffered a $US1.8bn loss on the sale of a $US21bn portfolio. Anxiety triggered a run on the bank, with customers pulling $42bn on Thursday.
US Treasury Secretary Janet Yellen ruled out a bailout for the bank’s investors. “We’re not going to do that again, but we are concerned about depositors and are focused on trying to meet their needs,” she said.