(Washington) The American authorities on Sunday, followed by their British counterparts on Monday, announced measures to protect the deposits of the bankrupt Californian bank Silicon Valley Bank (SVB), and to reassure individuals and businesses.
On Sunday, the American authorities thus announced a series of measures to reassure individuals and businesses with regard to the solidity of the American banking system. In particular, they will guarantee the withdrawal of all the deposits of the bankrupt bank.
In addition to SVB, the American authorities will allow access to all the deposits of another establishment, Signature Bank, which was closed automatically by the regulator, to everyone’s surprise, 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.
London, for its part, announced on Monday that the British branch of SVB had been sold to HSBC, which said it had acquired it for a symbolic pound.
“Silicon Valley Bank (UK) was sold today to HSBC. […] SVB UK customers will be able to access their deposits and banking services as normal from today,” the UK Treasury added in its statement.
The British financial authorities acted urgently all weekend, after the announcement of the setbacks of SVB, in order to reassure the markets and try to limit the damage for the technology sector to which this bankruptcy poses a “risk seriously,” admitted UK Finance Minister Jeremy Hunt.
The strong measures deployed by the American authorities testify to the turbulence which threatens the American banking system, disturbed by the forced monetary tightening of the Fed.
These increases in interest rates have in particular encouraged customers to invest their money in financial products better remunerated than current accounts and have shaken up the sector of new technologies, greedy in cash.
The wave of bank withdrawals that followed caused the default of three banks last week: SVB, Signature Bank, but also Silvergate Bank, smaller, but known for its privileged links with the cryptocurrency community.
New York-based Signature Bank is the 21e US bank, with assets estimated by the Fed at $110 billion at the end of 2022. Its default is the third largest in US history, behind SVB and Washington Mutual in 2008.
“Today we are taking decisive action to protect the US economy by strengthening confidence in our banking system,” the Fed, Treasury and FDIC said in their statement on Sunday.
After the announcement of the SVB takeover by the FDIC on Friday, many had worried about the fate of deposits blocked by the establishment’s default.
Some 96% of them were, in fact, not covered by the traditional guarantee of deposits, which provides up to 250,000 dollars per customer and per bank.
“The banking system is much more resilient and has a much better foundation than before the financial crisis” of 2008, hammered a Treasury official. All of the measures unveiled on Sunday were “necessary to address the systemic risk that we have observed in the financial markets”, he argued.
“Call for accounts”
As for US President Joe Biden, he said he was “firmly determined to hold accountable those responsible for this mess”.
The solution announced on Sunday protects depositors, but the shareholders of SVB and Signature Bank “are going to lose everything”, underlined the official of the Fed.
Joe Biden assured that “the American people and American businesses (can) have confidence that their bank deposits will be there when they need them”.
The head of state is due to speak on Monday on “how we will maintain a resilient banking system to protect our historic economic recovery”, he announced.
At the same time, the American authorities put SVB up for auction with the aim of finding a buyer as soon as possible.
This race against time recalls the weekend of September 13 and 14, 2008. The American authorities had failed to find a buyer for Lehman Brothers and refused to intervene, pushing the bank to file for bankruptcy, with dramatic consequences for the sector. finance and the economy as a whole.
Sunday’s announcements came minutes before the opening of the Tokyo Stock Exchange, which closed Monday down 1.11%.
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 “nearly half” of technology and life sciences companies financed by American investors.