After the bankruptcy of Silicon Valley Bank (SVB), the American authorities reacted and announced, on Sunday March 12, a series of measures to reassure individuals and businesses.

In particular, they will guarantee the withdrawal of all deposits from SVB and Signature Bank.

The US central bank, the Federal Reserve (Fed), has agreed to lend the necessary funds to other banks that need them to honor customer withdrawal requests.

These measures were taken jointly by Treasury Secretary Janet Yellen, the Fed and the Deposit Guarantee Agency (FDIC), after consultation with US President Joe Biden, according to a statement.

>> See also: How to explain the setbacks of the Silicon Valley Bank?

"Today, we are taking decisive action to protect the US economy by strengthening confidence in our banking system," the three bodies said in their statement.

"This initiative will allow the US banking system to continue to play its vital role of protecting deposits and providing access to credit for households and businesses."

A wave of withdrawals

The whole system testifies to the turbulence that threatens the American banking system, disturbed by the forced monetary tightening of the Fed.

The rise in rates has put pressure on banks, which lend long-term and borrow short-term, with short-term rates currently being much higher than long-term rates.

It has also encouraged customers to invest their money in financial products that pay better than current accounts and has shaken up several economic sectors, particularly new technologies.

A wave of withdrawals caused the failure of three banks this week, namely SVB, Signature Bank but also Silvergate Bank, smaller but known for its privileged links with the digital currency community.

New York-based Signature is the 21st largest bank in the United States, with assets estimated by the Fed at $110 billion, as of the end of 2022. Its default is the third largest in US history, behind SVB and Washington Mutual, in 2008.

Those responsible will be 'accountable', Biden pledges

After the announcement of the SVB takeover by the FDIC on Friday, many had worried about the fate of deposits blocked by the establishment's default.

96% of them were not, in fact, covered by the traditional guarantee of deposits, which provides up to 250,000 dollars per customer and per bank.

The solution announced on Sunday protects depositors, but "the investors (shareholders) of these two banks (SVB and Sigature Bank) will lose everything" and their leaders will be replaced, said a Fed official.

"I am strongly committed to holding accountable those responsible for this mess," US President Joe Biden said in a statement.

The head of state assured that "the American people and American businesses [could] be confident that their bank deposits will be there when they need them". 

Joe Biden will speak Monday morning on this subject.

"I will comment on how we will maintain a resilient banking system to protect our historic economic recovery."

At the same time, the American authorities put SVB up for auction with the aim of finding a buyer as soon as possible.

With AFP

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