Lhe collapse of Silicon Valley Bank is causing serious concern in the United States among customers, individuals and businesses (domestic and international). Upon the announcement of the bad news, the SVB found itself drowned in massive withdrawals of money to the point where the Deposit Guarantee Agency (FDIC) had to regain control. The American authorities announced on Sunday March 12 a series of measures to reassure customers about the solidity of the American banking system and will in particular guarantee the withdrawal of all deposits from the SVB.
In addition to SVB, the American authorities 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. “I am firmly committed to holding accountable those responsible for this mess,” Joe Biden said in a statement, assuring that “the American people and American businesses can be confident that their bank deposits will be there when they need it. will need”. The US president also said he will speak to the matter again on Monday morning: “I will comment on how we will maintain a resilient banking system to protect our historic economic recovery. »
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.
READ ALSOJacques de Larosière: “Magic money is an illusion”The whole system testifies to the turbulence that threatens the American banking system, disturbed by the forced monetary tightening of the Fed. The rise in rates has put pressure on banks, which lend long-term and borrow short-term, with short-term rates currently being much higher than long-term rates. It has also encouraged customers to invest their money in financial products that pay better than current accounts and has shaken up several economic sectors, particularly new technologies.
The wave of withdrawals that followed caused the default of three banks this week, namely SVB, Signature Bank but also Silvergate Bank, smaller but known for its privileged links with 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. “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. “This initiative will allow the US banking system to continue to play its vital role of protecting deposits and providing access to credit for households and businesses,” they continued.
The ghost of the 2008 crisis
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,” insisted a Treasury official. “To be clear, the situation is not that of 2008.” At the same time, the American authorities put SVB up for auction with the aim of finding a buyer as soon as possible.
The elected Democrat in the House of Representatives Josh Harder confirmed the holding of auctions to the information site Axios, estimating that the limit for submitting offers, initially set for Sunday 6:00 p.m. GMT, could be postponed.
READ ALSOThe specter of the crashThe race against time initiated by the American authorities recalls the weekend of September 13 and 14, 2008. They had then failed to find a buyer for the bank Lehman Brothers, pushing it to file for bankruptcy on Monday, with dramatic consequences for the financial sector and the economy as a whole.
If the big banks have so far been spared, several American establishments of medium or regional size unscrewed on the stock market on Friday, fled by worried investors. This is particularly the case of the Californian First Republic, which dropped nearly 30% in two sessions, Thursday and Friday, or of Signature Bank, before it closed on Sunday.
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.
SVB deposits amounted to around $170 billion, according to a document released Wednesday by the establishment, but colossal withdrawals have taken place since. “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 noted on Sunday on the channel. CBS.
On Sunday, British Finance Minister Jeremy Hunt said the fall of SVB posed a “serious risk” to his country’s tech sector. Janet Yellen ruled out a bailout of SVB on Sunday 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.