The US federal government has decided to fully preserve the deposits deposited at Silicon Valley Bank (SVB), which has been shut down. In addition, it announced that it had closed the New York State-based Signature Bank, which was insolvent and specialized in virtual currency, on the 12th (local time), and said that the bank’s depositors would also be protected.
The U.S. Treasury Department, the Federal Reserve System (Fed), and the Federal Deposit Protection Corporation (FDIC) issued a joint statement on the same day and said, “According to the recommendations of the Fed and FIDC, Treasury Secretary Janet Yellen, in consultation with the President, has decided to protect all depositors. ”he said. As a result, SVB depositors can withdraw their deposits in full regardless of the amount from Monday the 13th. However, it only protects depositors, not bailout support for shareholders and other investors.
U.S. regulators also announced in a joint statement that the New York-based Signature Bank had been shut down by New York State regulators on the same day because it was “in a similar ‘structural crisis’.” Signature Bank has been regarded as the main bank for cryptocurrency companies, and concerns about a bank run have been raised since the collapse of Silvergate Bank and SVB last week. However, the Treasury Department and the Fed said they would protect all signature bank deposits.
Previously, SVB, the main bank for US tech companies, was shocked to be shut down on the 10th, 48 hours after the massive deposit withdrawal (bank run). As concerns about startup bankruptcy grow in a structure centered on tech customers to the extent that 44% of US startups use SVB, it seems that US regulators are stepping up to protect depositors. The total amount of SVB deposits was about 175.4 billion dollars (about 232 trillion won), of which 95% exceeded the depositor protection limit (250,000 dollars). This is because SVB’s main customers are corporate customers, so most of them deposited more than $250,000.
The shutdown of the SVB shows that the Fed’s steep rate hikes have increased vulnerabilities, especially in interest-rate sensitive sectors. 40-year history of 277 trillion won in assets SVB’s deposits have more than tripled due to the pandemic tech boom, but loan sales have not caught up with the speed of deposits. As a result, they invested a large amount in US Treasury bonds, a safe asset, with their childish deposits, and suffered losses due to the decline in government bond prices during the high interest rate phase.
Signature Bank, which was closed on the same day, is also a small and medium-sized bank that has been targeting virtual currency companies. After the bankruptcy of Silvergate Bank and SVB, along with San Francisco-based First Republic Bank, there has been controversy over the financial stability of banks.
As market fears spread, risks could be transferred to small regional banks or banks specialized in industries sensitive to Fed interest rates, such as virtual currency, tech, and real estate. it came out Shortly after the US federal government’s intervention was announced, the US New York Stock Exchange index futures all turned to the uptrend.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.