U.S. and U.K. regulators consider ways to help SVB depositors, FDIC auctioning assets: reports

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The US Federal Deposit Insurance Corporation is reportedly holding an auction for the assets of the failed Silicon Valley Bank of California later this week, while also reportedly looking to possibly create a fund to protect depositors. The Federal Reserve is getting involved.

Meanwhile, the UK government said on Sunday it was working on a lifeline for companies whose deposits were locked in the British branch of the Silicon Valley bank.

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The FDIC launched an auction process for the Silicon Valley bank late Saturday, with the final bid set to take place by Sunday afternoon. Bloomberg Representativeheyrted sunday.

Sources told Bloomberg that the FDIC is hoping for a quick deal, but a winner may not be known until late Sunday, and it is possible that no deal is reached. Representatives for the FDIC did not immediately respond to requests for comment.

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Silicon Valley Bank, the 16th largest lender in the US, fell into FDIC receivership on Friday after its customer base of technology startup businesses grew concerned and withdrew deposits. At the end of last year, the SVB held more than $175 billion in deposits, most of which are uninsured, and $209 billion in total assets. Trading in SVB SIVB shares,
The halving was done on Friday amid reports of buyer demand.

LookSilicon Valley bank branches shut down by regulator in biggest bank failure since Washington Mutual

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The sources said the FDIC is now working on selling the properties and making available a portion of customers’ uninsured deposits by Monday. The agency has said it will make 100% of insured deposits available when Silicon Valley Bank branches reopen on Monday.

Meanwhile, discussions are reportedly underway between the Federal Reserve and the FDIC to possibly create a fund to rescue more depositors from other troubled banks, following the country’s first bank failure since late 2020. Bloomberg also reported.

The Fed and the FDIC, which is charged with protecting depositors of insured US banks, are talking about ways to ease panic among financial institutions as some Silicon Valley bank customers scramble to get their money back. Questions are being raised.

FDIC, that insures deposits of up to $250,000 at eligible banks, has said all insured depositors will have full account access as of Monday morning, but customers with accounts with more than $250,000 have been given an FDIC hotline to call.

Uninsured depositors are expected to receive a receivership certificate and possibly dividends after the bank’s assets are sold by the FDIC, but the focus is on the fact that more than 90% of the bank’s deposits are uninsured.

Silicon Valley Bank failed for a simple reason: Its prime startup customers lost trust.

Some analysts are now questioning whether similar problems may be lurking at other institutions. Bloomberg quoted sources as saying that FDIC officials questioned several small and medium lenders on Saturday, seeking information about their financial condition.

First Republic Bank FRC,
Shares were under pressure last week, as a result of which on Friday the bank assured its “continued safety and stability and strong capital and liquidity position”.

UBS analyst argues First Republic is ‘no SIVB’ as stock stabilizes

And: 20 banks that are sitting on huge potential securities losses – as was SVB

One fear is that now with alarm bells ringing in the wake of the Silicon Valley bank collapse, wealthy clients may be pulling their money out of regional and mid-sized banks in favor of larger institutions like JP Morgan JPM.
Some banking sources told the New York Post.

US Treasury Secretary Janet Yellen said on CBS’s “Face the Nation” on Sunday that the government would not offer relief to the failed bank, with officials focused on how to help depositors with their money. Yellen said Friday that the Treasury was looking at some banks “very carefully” in the wake of the Silicon Valley bank collapse.

As concerns mount over the Silicon Valley bank, Yellen says she has been ‘working throughout the weekend with our banking regulators to design appropriate policies’ to address depositors

Meanwhile, the UK government on Sunday said it is working on a lifeline for companies whose deposits are locked in the British branch of the Silicon Valley bank. The Wall Street Journal reported.

In a statement, the UK Treasury said it wanted to “prevent or minimize damage to some of our most promising companies,” adding the plan would meet their short-term operating and cash flow needs.

Late Friday the Bank of England said it planned to put SVB’s UK subsidiary into insolvency process on Sunday and that it would pay depositors “as quickly as possible”.

The Bank of England said that under the UK insolvency process, deposits of up to £85,000 in individual accounts, equivalent to about $102,000, and up to £170,000 in joint accounts would be returned to customers. The other assets and liabilities of the bank will be managed by the bank liquidator and the recovery will be distributed to the creditors.

British tech companies raised £24 billion last year, the third largest after the US and China, according to data from Dealerroom. BeZero Carbon Ltd., a London-based startup that provides a credit-rating service for carbon offsets, was one of them. The company’s chief executive officer, Tommy Ricketts, said it completed a $50 million funding round in November and as of last week had about half that money in its Silicon Valley bank account.

Bank Website indicates that it also has branches in Canada, China, India, Sweden, Denmark, Germany and Israel.

The banking crisis has put investors on edge ahead of Monday’s US stock market open, with investors expected to closely watch how trading resumes in Tokyo and across Asia later on Sunday.

Major US indexes lost more than 4%, with the Dow Jones Industrial Average DJIA
Friday suffered its worst week since June as fears of continued contagion in the banking sector added to ongoing concerns over the economy.

What’s next for stocks after Silicon Valley Bank collapse as investors await key inflation reading

Credit: www.marketwatch.com /

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