The recent implosion of some US banks spiked mixed reactions among the public. Most customers of both Silicon Valley and Signature Bank feared a possible loss of their money following the closure of the banks.
However, the Treasury Secretary, Janet Yellen, has dispersed such a motion by assuring the markets of the federal government’s dedication to protecting the banks’ customers. She said the government would secure customer deposits in the two failed banks. But she maintained it would not apply to all cases of bank failures in the future.
US Government To Protect Customers’ Deposits
According to CNBC news, Treasury Secretary Yellen told lawmakers and the markets of the government’s commitment to protecting banks’ deposits. This reassurance regards the closure of Silicon Valley Bank and Signature Bank last week. Yellon mentioned that the government would ensure a sound banking system to boost Americans’ confidence regarding the safety of their deposits.
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Following the implosion of SVB and Signature Bank, regulators insured all deposits at the failed banks. Also, the move included other deposits covered by the FDIC insurance, which were above the $250,000 limit.
Further, the Federal Reserve alleviated the situation by creating a discount window. It loosened its borrowing guidelines for banks that seek short-term funding via the discount window. Also, the Fed developed a limitless facility that provides one-year loans. This will help some troubled banks faced with increased cash withdrawals.
The Treasury Secretary has been at the forefront of the government’s efforts to recover customers’ deposits at the two failed banks. In her statement, Yellen acknowledged that all the efforts demonstrate the government is resolute in ensuring the safety of depositors’ funds.
Also. she explained the possibility of covering uninsured deposits if their failure creates systematic risk and significant financial and economic consequences. Such an action will help banks satisfy all their depositors’ needs.
US Banking Sector Under Tension
The banking sector is currently under tension with the failure of Silvergate, Silicon Valley, and Signature Bank. Customers of SVB are mainly venture capital companies, small tech firms, and entrepreneurs that run daily cash transactions for their businesses.
Congress is still in deliberations with possible legislative moves that will stop any future bank collapse similar to SVB. Also, acquisition bids are flowing for the failed banks. Notably, an FDIC spokesperson told Reuters that there wouldn’t be divestment of crypto activities for the sale of the banks.
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Meanwhile, some top banks in the US have taken steps to support the failing bank. One of the regional banks, First Republic Bank, received funds to the tune of $30 billion to support its operations. Some big wigs that pushed its survival include Bank of America Corp, Goldman Sachs, JP Morgan Chase, and Citigroup Inc.
Featured image from FT times and chart from Tradingview.com
