NEW YORK (AP) — President Joe Biden told U.S. residents on Monday that the country’s financial systems are sound, following the rapid and stunning collapse of two banks that raised fears of a broader upheaval.
“Americans can be confident in the security of the banking system,” he said from the Roosevelt Room before a trip to the West Coast. “Your deposits will be there when you need them.”
U.S. regulators shuttered Silicon Valley Bank on Friday after experiencing a traditional bank run, where depositors rushed to withdraw their funds all at once. It is the second largest bank failure in US history, second only to the 2008 failure of Washington Mutual.
In a sign of how quickly the financial hemorrhage was happening, regulators announced that New York-based Signature Bank had also failed.
The president, speaking from the Roosevelt Room shortly before US markets open, said he would seek to hold those accountable and is pushing for better oversight and regulation of big banks. And he promised that no loss would be borne by taxpayers.
THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.
NEW YORK (AP) — The U.S. and U.K. governments are taking extraordinary steps to prevent a potential banking crisis after California-based Silicon Valley Bank collapsed raised fears of a wider upheaval.
U.S. regulators worked through the weekend to find a buyer for the bank, which held more than $200 billion in assets and targeted tech startups, venture capitalists and well-paid tech workers.
While those efforts appeared to have failed, officials assured all bank customers that they would be able to access their money on Monday.
The assurances came as part of a massive emergency lending program intended to prevent a wave of bank runs that would threaten the stability of the banking system. and the economy as a whole.
Meanwhile, the Bank of England and the UK Treasury said on Monday morning they had facilitated the sale of the bank’s London branch to HSBC, Europe’s biggest bank, guaranteeing the safety of 6.7 billion pounds ($8.1 billion) of deposits.
US regulators rushed to shut down Silicon Valley Bank Friday when it experienced a traditional bank run, where depositors rushed to withdraw their funds all at once. It is the second largest bank failure in US history, second only to the 2008 failure of Washington Mutual.
In a sign of how quickly the financial hemorrhage was happening, regulators announced that New York-based Signature Bank had also filed for bankruptcy and was seized on Sunday.
With over $110 billion in assets, Signature Bank is the third largest bank failure in US history. Another beleaguered bank, First Republic Bank, said on Sunday it had bolstered its financial health by accessing funding from the Fed and JPMorgan Chase.
The developments left markets jittery that trading started on Monday. Asian and European markets fell but not dramatically, and US futures fell.
In an effort to bolster confidence in the banking system, the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corp. said on Sunday that all Silicon Valley Bank customers would be protected and able to access their money.
“This step will ensure that the U.S. banking system continues to play its vital role of protecting deposits and providing access to credit to households and businesses in a way that supports strong and sustainable economic growth,” the agencies said. in a joint statement.
Under the plan, depositors at Silicon Valley Bank and Signature Bank, including those with holdings above the $250,000 insurance limit, will be able to access their money on Monday.
The UK also acted quickly, working through the weekend to arrange the sale of Silicon Valley Bank UK Ltd., the California bank’s UK branch, for the face sum of one pound.
Although the bank is small, with less than 0.2% of UK bank deposits according to central bank statistics, it has played an important role in funding the tech and biotech startups the UK government relies on to fuel growth. economic.
Jeremy Hunt, the UK government’s treasury chief, said some of the country’s top tech companies could have been “wiped out”.
“When you have very young companies, very promising companies, they are also fragile,” Hunt told reporters, explaining why authorities acted so quickly. “They have to pay their staff and they were worried that from 8am this morning they literally couldn’t access their bank account.”
He stressed that there had never been any “systemic risk” for the British banking system.
In the United States, officials have called their lending program what central banks have done for decades: lend freely to the banking system so customers can be sure they can access their accounts when needed.
This will allow banks that need to raise funds to pay depositors to borrow that money from the Fed, rather than having to sell Treasuries and other securities to raise it.
Silicon Valley Bank began its slide into insolvency when it was forced to dump some of its loss-making Treasuries to fund customer withdrawals. Under the new Fed program, banks can post these securities as collateral and borrow from the emergency facility.
The Treasury has set aside $25 billion to compensate for the losses incurred. Fed officials have said, however, that they do not expect to have to use any of this money, given that the securities deposited as collateral have a very low risk of default.
Although Sunday’s measures marked the most extensive government intervention in the banking system since the 2008 financial crisis, the actions are relatively limited compared to what was done 15 years ago. The two failed banks themselves were not rescued and taxpayers’ money was not provided to them.
President Joe Biden said Sunday night as he boarded Air Force One for Washington that he would address the situation on Monday.
In a statement, Biden also said he was “firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of big banks so that we are no longer in this position.”
Some prominent Silicon Valley executives feared that if Washington did not rescue the bankrupt bank, customers would flock to other financial institutions in the days to come. Share prices have plunged in recent days at other banks that cater to tech companies, including First Republic and PacWest Bank.
The bank’s clients include a range of businesses in the California wine industrywhere many wineries rely on Silicon Valley Bank for loans, and tech startups dedicated to fighting climate change.
Tiffany Dufu, founder and CEO of The Cru, a New York-based career coaching platform and community for women, posted a video on LinkedIn on Sunday from an airport bathroom, saying the banking crisis was putting her resilience to the test. the test.
Since her money was tied up in Silicon Valley Bank, she had to pay her employees from her personal bank account. With two teenagers to support who will go to university, she said she was relieved to learn that the government’s intention is to make depositors whole.
“Small businesses and early-stage startups don’t have much access to leverage in a situation like this, and we’re often in a very vulnerable position, especially when we have to fight so hard. to enter transfers into your bank. matters to begin with, especially for me, as a black founder,” Dufu said. ___ Rugaber and Megerian reported from Washington. Sweet and Bussewitz reported from New York. Associated Press writers Hope Yen in Washington, Jennifer McDermott in Providence, Rhode Island and Danica Kirka in London contributed to this report.
. After collapse Silicon Valley Bank the United States United Kingdom strive prevent crisis