As the aftermath of the Silicon Valley Bank (SVB) bankruptcy shows signs of spreading, the US government is responding.
It is reported that regulators are considering paying a certain portion of the deposit protection limit early to minimize damage and raising funds in preparation for the spread to other banks.
President Joe Biden also discussed measures related to SVB bankruptcy with California Governor Gavin Newsom, and the possibility that the Federal Reserve System (Fed ยท Fed) will reduce the rate increase is also predicted.
According to Bloomberg News on the 11th (local time), US regulators are discussing ways to enable early payment of some of the amounts that are not protected by SVB.
US regulators are moving quickly to sell SVB’s assets so customers can withdraw some of their uninsured deposits as early as the 13th, sources said.
The current US deposit protection limit is $250,000, which allows early payment of a certain portion of the amount exceeding this limit.
Sources who requested anonymity explained that claims for early payments ranged from 30% to 50% or more of the excess amount.
They added that this is to minimize management difficulties caused by tying up their funds since SVB’s main trading targets are Silicon Valley startups and venture investors.
Aside from the $250,000, the excess amount that can be withdrawn on the 13th has yet to be determined.
As of the end of last year, SVB’s total deposits stood at $175.4 billion. Among them, deposits that exceed the FDIC insurance limit amount to $151.5 billion or 90% of the total.
U.S. regulators are also known to be reviewing plans to create a new fund to support deposits in preparation for SVB Bank’s bankruptcy spreading to other banks.
As of the end of last year, as of the end of last year, the SVB collapsed with total assets of $209 billion and total deposits of $175.4 billion, raising distrust in other small and medium-sized banks, raising the possibility of a bank run (large-scale withdrawal).
The regulator is said to have discussed the plan with bank executives. The move is meant to reassure depositors and help contain panic, sources said.
“The new fund is part of a contingency plan amid growing fears about the health of banks focused on the venture capital and startup ecosystem,” Bloomberg reported.
President Joe Biden discussed countermeasures related to the SVB bankruptcy with California Governor Gavin Newsom that day.
The White House explained in a statement that “the president and governor have spoken with Silicon Valley Bank about their efforts to address this situation.”
On the 10th, Governor Newsom declared a state of emergency to secure full federal support in California’s winter storm damage and SVB crisis.
During this, there are also observations that the SVB bankruptcy may affect the rate hike by the Fed this month.
The Fed plans to hold a Federal Open Market Committee (FOMC) meeting for two days from the 21st to decide the level of interest rate hike.