US rushes to contain SVB fallout, Biden vows to fix ‘mess’

WASHINGTON: US and European authorities moved to ease fears over the health of the banking system following the failure of Silicon Valley Bank, as US regulators took over a second troubled lender.

US federal authorities stepped in to ensure depositors still had access to their funds at SVB and promised other institutions help in meeting customers’ needs, but markets remained on edge Monday following the bank’s sudden collapse.

In Britain, banking giant HSBC bought SVB’s UK division for just £1 (US$1.2) in a rescue deal overseen by the Bank of England and the government, while French and German authorities said there were no risks to their financial systems.

Amid fears over the wider sector, US President Joe Biden vowed to hold “fully accountable” the people responsible for “this mess” and said he would deliver remarks on Monday morning on maintaining a resilient banking system.

“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” Biden said.

In a joint statement on Sunday, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Treasury Department said SVB depositors would have access to “all of their money” starting Monday and that American taxpayers will not have to foot the bill.

They added that depositors in Signature Bank – a New Yorkbased regional-size lender with significant cryptocurrency exposure which was shuttered on Sunday after its stock price tanked – would also be “made whole.”

The Fed also announced it would make extra funding available to banks to help them meet the needs of depositors, which would include withdrawals.

Regulators on Friday took control of SVB – a key lender to startups across the United States since the 1980s – after a huge run on deposits left the medium-sized bank unable to stay afloat on its own.

SVB’s implosion represents the largest bank failure since Washington Mutual in 2008.

The British government’s SVB UK rescue deal also guarantees deposits of customers, which includes major businesses in the technology and life science sectors.

“This (deal) ensures customer deposits are protected and can bank as normal, with no taxpayer support,” said British finance minister Jeremy Hunt, who had warned a day earlier that SVB’s collapse posed a serious risk to the UK’s tech sector.

Germany’s finance watchdog said the “distressed situation” of SVB’s German branch “does not pose a threat to financial stability”. — AFP