Silicon Valley Bank: Regulators offer plan to ‘ensure U.S. banking system continues to perform its vital roles’
Amritpal Kaur Sandhu-Longoria
Federal regulators said Sunday they were taking steps to ensure that depositors of the failed Silicon Valley Bank will have access to all their money on Monday.
The Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation announced that the bank’s troubles posed a systemic risk to the financial system, allowing regulators to take the unusual step of guaranteeing the deposits.
“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.
The regulators also said they were taking over a second failing financial institution, Signature Bank of New York, and similarly designating it as posing a systemic risk and stating the federal agencies would backstop its deposits.
The actions came after a run on Silicon Valley Bank last week threatened to prevent most depositors from having access to savings over $250,000, which typically are not insured by the FDIC, and only hours before trading began in Asia.
The near-financial crisis that U.S. regulators had to intervene to prevent left Asian markets jittery as trading began Monday. Japan’s benchmark Nikkei 225 slipped about 1.2% in morning trading. Australia’s S&P/ASX 200 shed 0.6% to 7,104.30. South Korea’s Kospi, though, was little changed.
The bank’s failure marks the second largest in U.S. history after the 2008 demise of Washington Mutual. It came because tech companies struggled to get financing as venture capital funding dried up and began withdrawing their cash from SVB. To cover the withdrawals, the bank was forced to sell bonds at a loss because of rapidly rising interest rates over the past year.
Was this the proper way to handle this problem – selling the bonds at a loss – did regulators approve this?
Was any of this lost money used to horse around with investing in CRYTO (financing venture capital)?