File photo of Treasury Secretary Janet Yellen. Ms. Yellen said on March 12, 2023 that the US government would not rule out an SVB bailout. , Photo Credit: AP
US Treasury Secretary Janet Yellen said on March 12 that the government wanted to avoid financial “contagion”. Silicon Valley Bank explosion But refused the bailout of the institution.
“We want to make sure that problems in one bank don’t lead to contagion to other good banks,” Ms. Yellen said during an interview with CBS.
On Friday, US regulators pulled the plug on SVB – a major lender to US startups since the 1980s – after running out on deposits making it no longer feasible for the mid-sized bank to stay afloat on its own.
After the SVB disclosure on Wednesday, investors punished the banking sector overall on Thursday, but stocks of some big banks posted gains till Friday.
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However, regional lenders remain under pressure, including First Republic Bank, which fell nearly 30% in two sessions on Thursday and Friday, and Signature Bank, a cryptocurrency-exposed lender, which lost a third of its value since Wednesday evening Is.
Ms Yellen said on Sunday that the government was working with the US deposit guarantee agency, the FDIC, on a “solution” to the situation at SVB, where about 96% of deposits are not covered by the FDIC’s reimbursement guarantee.
“I’m sure they (FDIC) are considering a wide range of options available, including acquisition,” she said.
Ms Yellen said the reforms undertaken after the 2008 financial crisis meant the government was not considering a bailout for SVB.
“During the financial crisis, there were investors and owners of systemically large banks that were bailed out … and the reforms that have been put in place mean we’re not going to do that again,” she said.
“But we are concerned about depositors and are focused on trying to meet their needs.”
Following the 2008 failure of Lehman Brothers and the ensuing financial meltdown, US regulators required major banks to hold additional capital in case of trouble.
US and European authorities conduct regular “stress tests” to uncover vulnerabilities in the largest banks.
The implosion of SVB represented not only the largest bank failure since Washington Mutual in 2008, but also the second largest failure for a retail bank in the United States.
Little known to the general public, SVB specialized in startup funding and has become the 16th largest US bank by assets: at the end of 2022, it will have $209 billion in assets and approximately $175.4 billion in deposits Was.
Earlier on Sunday, Britain’s finance minister Jeremy Hunt warned that the country’s technology and life sciences sectors were at “serious risk” after the SVB closure, noting that the bank manages the wealth of some of Britain’s most promising businesses. does.
He said, however, that the Governor of the Bank of England had made it “very clear” that the collapse of SVB did not pose any systemic risk to the UK financial system.