U.S. regulators unveil action plan to deal with the collapse of SVB Bank
Banking regulators-the Federal Reserve, the FDIC and the Treasury Department have developed a plan to support depositors and emergency funding for banks and other financial institutions in response to the bankruptcy of Silicon Valley Bank (SVB). The measures announced by regulators should help overcome panic caused by fears over the collapse of the bank, which was focused on financing technology startups.
The Fed said it is creating the Emergency Financing Facility Program (BTFP) to protect financial institutions affected by the SVB collapse. Regulators said depositors at both SVB and Signature Bank in New York, which were also shut down by regulatory action, will have full access to their deposits starting Monday, March 13. The FDIC’s deposit insurance fund will be used to cover the deposits.
The joint statement notes that no measures to bail out banks at taxpayer expense related to any of the new measures will apply. The FDIC’s term financing facility is loans of up to one year to banks, savings and credit unions, and other financial institutions. Those who take advantage of the financing are asked to provide high-quality collateral against them: Treasury bonds, agency debt and mortgage-backed securities.
The U.S. Treasury Department will allocate up to $25 billion from its monetary stabilization fund to support the term financing program (BTFP). The Fed said it would soften the terms of the funds, which would use the same terms as the BTFP. The stock markets reacted positively, with S&P 500 futures up 1.4% and Nasdaq 100 futures up 1.5% by Sunday evening, March 12. Futures tied to the Dow Jones Industrial Average were up 310 points.
Treasury Secretary Janet Yellen said Sunday morning that there would be no government bailout of SVB. “We’re not going to do it again. But we are concerned about depositors and we are focused on trying to meet their needs,” Yellen told CBS.
The U.S. Treasury secretary said she was working with bank regulators over the weekend on a suitable plan to manage the situation that has arisen.
Earlier, we reported that U.S. regulators promised customers access to deposits in the bankrupt SVB.
Startups under threat worldwide after Silicon Valley Bank collapse
High-tech startups have been hit. Companies around the world are facing a fight for survival after the collapse of a major US investment bank, Silicon Valley Bank (SVB). There was a “huge disruption” in the industry globally, Bloomberg reported, citing market participants. The entire stock market, and the S&P 500 in particular, plummeted.
Startups under threat
The bankruptcy of the lending institution, in particular, affected the co-founder of startup Birdly Inc. Quang Hoang. The entrepreneur invested about $10 million in SVB and is still unable to repay the money four days after the bank was shut down by the California Department of Financial Protection and Innovation. However, the entrepreneur is far from the only one who has faced similar problems, the article specifies.
“Hoang was one of thousands of founders around the world this week trying to track down their money after days of chaos and who are completely rethinking the way they run their own businesses. Startups from Silicon Valley to London to Tel Aviv to tech hubs across Africa have depended on SVB as a one-stop store for everything from storing their fortunes to personal mortgages,” the story says.
Now investors and technology companies are predicting a complicated financial future for themselves, even if the bankrupt bank begins to attract deposits from customers under a new name. Many market participants faced a “financial payback” for their overreliance on the credit institution’s risky investment assets, the memo said.
On March 11, the California Department of Financial Protection and Innovation closed Silicon Valley Bank, a large investment bank based in Santa Clara County. All insured deposits from SVB were transferred to Deposit Insurance National Bank of Santa Clara. Depositors were expected to have access to their accounts by March 13.
Earlier we reported that the U.S. Department of Justice has begun an investigation into the circumstances of the collapse of Silicon Valley Bank.
U.S. Justice Department Opens Investigation into Silicon Valley Bank Collapse
The U.S. Justice Department is set to investigate the circumstances surrounding the bankruptcy of Silicon Valley Bank (SVB), which was the largest since the global crisis in 2008. The entire stock market collapsed, in particular the S&P 500. This was reported by The New York Times (NYT), citing two people familiar with the situation.
The sources of the newspaper noted that the investigation is at a very early stage, and it is not yet very clear what the focus of federal investigators and prosecutors will be.
Lawyers believe that the main point that may attract investigators is that a few weeks before the crash of SVB, several top managers sold their shares. The sale of securities brought the sellers millions of dollars.
Market experts pointed out that some top managers sold their shares by previously announced plans, so that such sales would not seem illegal. For this purpose, the date of sale of securities and their volume are chosen in advance. However, some politicians have already said that all of the bank’s top managers should return the money received from the sale of shares.
Earlier on Wednesday, the Wall Street Journal, citing its sources, wrote that creditors of the bankrupt bank SVB joined to make profits after the collapse of the financial institution.
Earlier, we reported that an American billionaire declared the collapse of American capitalism.
U.S. Billionaire Says ‘Collapse of American Capitalism’
Is the collapse of the U.S. economy coming? The Silicon Valley Bank (SVB) bailout package released by American regulators shows that American capitalism is “crumbling before our eyes”. Ken Griffin, founder of the hedge fund Citadel, told The Financial Times.
“There has been a loss of financial discipline because the government bailed out depositors completely. It would have been a great lesson in moral hazard. The loss to depositors would have been insignificant, and it would have increased the importance of risk management,” he said.
In Griffin’s view, the U.S. government should not have taken such drastic action. Griffin’s position contrasts with that of another senior hedge fund manager, Bill Eckman, who on March 13 urged the Federal Deposit Insurance Corporation to “clearly guarantee all deposits now,” warning that “hours matter.”
Eckman wrote on Twitter that “our economy will not function effectively without our community and regional banking system.”
The situation is already affecting the Euro / U.S. Dollar exchange rate.
We previously reported that The Fed announced an emergency bailout of the U.S. banking sector.
Forex8 months ago
Forex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
Forex4 months ago
Unbiased review of Pocket Option broker
World5 months ago
Why are modern video games an art form?
Forex8 months ago
How is the Australian dollar doing today?
Cryptocurrency8 months ago
What happened in the crypto market – current events today
Stock Markets3 months ago
Amazon layoffs news: company announces record layoffs
Stock Markets8 months ago
Morgan Stanley: bear market rally to continue
Forex7 months ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985