The US Department of Justice has opened an investigation into the bankruptcy of Silicon Valley Bank (SVB), targeting in particular recent share sales by a number of the bank's leaders, while US stocks rebounded at the close and expectations of a rate hike calmed.
The Wall Street Journal reported that the U.S. Securities and Exchange Commission, which oversees financial markets (SEC), launched the investigation.
She said investigations were still at an initial stage and might not lead to formal charges.
The factor that precipitated the bankruptcy of Silicon Valley Bank, which is close to the startups, was the withdrawal of very large sums by customers with more than $250,<> in their accounts, the maximum amount guaranteed by the Federal Deposit Insurance Corporation (FDIC).
On Friday, the bank was placed under the supervision of the institution, marking the largest bank bankruptcy in the United States since the 2008 financial crisis.
To underscore the strength of the banking system, authorities indicated Sunday that the entire deposits of the bankrupt bank would be secured.
The Justice Department and the U.S. Securities and Exchange Commission declined to comment on the opening of the investigation.
Senate Banking Committee Chairman Sherrod Brown said Congress should enact new financial regulations after the Silicon Valley Bank collapse.
Brown explained that these rules will enhance stress tests, capital standards, and liquidity at banks. But he noted that the prospects for such a move remained slim.
Customer Engagement
The developments come as the head of Silicon Valley Bridge, newly established by U.S. banking authorities and transferred all deposits of the collapsed Silicon Valley Bank, on Tuesday urged all customers to return with their money withdrawn as large banks see an influx of deposits.
Silicon Valley Bank, the main lender to U.S. startups since the eighties, collapsed after a sudden rush to withdraw deposits, prompting regulators to seize control of it on Friday.
"The first thing you can do to support the future of this institution is to help us rebuild our deposit base," Silicon Valley Bridge CEO Tim Mayopoulos said in a statement, adding, "Whether by leaving deposits with Silicon Valley Bridge Bank or remitting deposits withdrawn over the past days."
"We are doing everything we can to rebuild, gain your trust again and continue to support the innovation economy."
The Federal Deposit Insurance Corporation has confirmed that it will cover all Silicon Valley Bank depositors, even exceeding the $250,<> limit of the protected deposit.
The bankruptcy of Silicon Valley Bank on Friday, the largest collapse of a U.S. bank since 2008, was preceded by the liquidation of Silvergate on Wednesday, the bank of choice of the cryptocurrency community, and U.S. authorities on Sunday forced Signature Bank, which ranks 21st by volume, to close.
Silicon Valley Bank Collapse Impacted Markets (Getty Images)
Stocks and recovery
U.S. stocks rebounded at the close on Sunday evening, and expectations of a rate hike were eased by inflation data and easing tensions over the succession of crises in the banking sector following the Silicon Valley Bank collapse.
The Nasdaq Composite Index, which is dominated by technology companies, rose more than 2% after several sessions of disruption due to the fallout from the bank's collapse.
Stocks in the financial sector recovered some of the losses as the S&P rebounded after the biggest one-day sell-off since June 2020.
Fears of a succession of crises in the banking sector have eased as U.S. President Joe Biden and global decision-makers have vowed to contain the crisis.
The Dow Jones Industrial Average also rebounded yesterday with gains of more than 1%, but over the course of a week it fell more than 2%.
In currency markets, the dollar found support in Asian markets today, as investors trimmed expectations for a U.S. interest rate cut as fears of a banking crisis eased and data showed inflation remained high.