The American authorities are striking hard to reassure individuals and businesses about the solidity of the American banking system caught in the turmoil. They thus announced, on Sunday March 12, that they would guarantee the withdrawal of all deposits from the bankrupt bank, Silicon Valley Bank (SVB).
In addition to SVB, they will allow access to all the deposits of another establishment, Signature Bank, which has been closed automatically by the regulator, according to a press release. The Federal Reserve (Fed) – the US central bank – has also agreed to lend the necessary funds to other banks that need them to honor withdrawal requests from their customers.
These measures were taken jointly by Treasury Secretary Janet Yellen, the Fed and the Deposit Guarantee Agency (FDIC), after consultation with US President Joe Biden, the statement said. The Fed’s lending program is backed by $25 billion (about €23.5 billion) from a reserve of Treasury money.
“I am firmly committed to holding accountable those responsible for this mess,” Biden said, assuring that “the American people and American businesses can have confidence that their bank deposits will be there when they need them.” “.
The whole system testifies to the turbulence that threatens the American banking system, disturbed by the forced monetary tightening of the Fed. The wave of withdrawals that followed caused three banks to default this week: SVB, Signature Bank and Silvergate Bank, a smaller one known for its close ties to the cryptocurrency community. The New York-based Signature Bank is the 21st American bank, with assets estimated by the Fed at 110 billion dollars, at the end of 2022. Its failure is the third largest in the history of the United States, behind SVB and Washington Mutual, in 2008.
“The situation is not like 2008”
“Today, we are taking decisive action to protect the U.S. economy by strengthening confidence in our banking system,” the Fed, Treasury, and FDIC said in their statement. “This initiative will allow the U.S. banking system to continue to play its vital role of protecting deposits and providing access to credit for households and businesses,” they continued.
After the announcement of the FDIC takeover of SVB on Friday, many had worried about the fate of deposits blocked by the institution’s default. Some 96% of them were not covered by the traditional deposit guarantee, which insures up to $250,000 per customer and per bank.
“The banking system is much more resilient and on a much better footing than before the financial crisis,” a Treasury official said. “To be clear, the situation is not like 2008.”
“The Fed’s actions this weekend are intended to end the disruptions in the banking sector and the financial system that had manifested rapidly in recent days,” a Fed official explained.
At the same time, the American authorities put SVB up for auction with the aim of finding a buyer as soon as possible.
No public money injected
In addition to the stability of the banking system, many expressed concern about the repercussions of the SVB bankruptcy on the technology sector, American but also beyond. SVB boasted that its clients were “almost half” tech and life science companies backed by American investors. SVB’s deposits were around $170 billion, according to a document released Wednesday by the establishment, but colossal withdrawals have taken place since then.
“A lot of depositors are small businesses that need to be able to access their funds to pay their bills and they employ tens of thousands of people” in the United States, Treasury Secretary Janet Yellen said on Sunday. CBS channel. She ruled out a rescue of SVB via an injection of public money.
The solution announced on Sunday protects depositors but will not prevent the bank’s shareholders from losing all of their investment and will also lead to the cancellation of certain debts.
