US Regulators Busy to Prevent Situation from Escalating
The U.S. government has taken swift action as concerns grow both domestically and internationally following the collapse of Silicon Valley Bank (SVB). It is considering measures to allow early payment of amounts exceeding the deposit insurance limit. Since this incident could affect other banks as well, the government is also exploring the establishment of a fund.
Bloomberg reported on the 11th (local time) that U.S. regulators are discussing a plan to allow early payment of some uninsured deposits at SVB. Currently, the U.S. deposit insurance limit is $250,000. According to foreign media, efforts are underway to enable faster payment of some amounts exceeding this limit.
To this end, U.S. regulators plan to sell SVB assets and allow customers to withdraw part of their uninsured deposits. Foreign sources claim that withdrawals could be possible as early as the 13th. They also explained that early payment could cover 30-50% or even more of the excess amount.
SVB’s main clients are U.S. Silicon Valley startups and venture capitalists. If their fund operations are restricted, many companies could face difficulties. This is the reason behind the U.S. government's rapid response. As of last year, SVB’s total deposits amounted to $175.4 billion. Of this, $151.5 billion, or 90%, exceeded the Federal Deposit Insurance Corporation (FDIC) insurance limit.
Additionally, U.S. regulators are considering creating a new fund to support deposits in order to prevent the SVB collapse from spreading to other banks. According to Bloomberg, the Federal Reserve (Fed) and FDIC are reviewing the establishment of this fund. However, specific details such as the size and timing of the fund have not been disclosed.
U.S. President Joe Biden has taken action in response to the SVB collapse. On the same day, President Biden discussed the matter with California Governor Gavin Newsom. The day before, Governor Newsom declared a state of emergency, expressing concern over potential state-level damage caused by the SVB incident.
Governments of countries where SVB operates, including Canada and the United Kingdom, are also closely monitoring the situation. On the morning of the same day, UK Chancellor of the Exchequer Jeremy Hunt shared related information with the Governor of the Bank of England, the UK’s central bank. The UK Treasury plans to hold meetings with companies affected by the SVB collapse.
Meanwhile, according to The New York Times, the SVB collapse could influence the Federal Reserve’s decision on the size of the interest rate hike this month. The Fed will hold the Federal Open Market Committee (FOMC) meeting over two days starting on the 21st to decide the level of the rate increase.
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