As worries about a wider repercussions throughout the banking sector increased, U.S. Treasury Secretary Janet Yellen said she was working with regulators to address the failure of Silicon Valley Bank but ruled out a bailout.
SVB Financial Group, a startup-focused lender, failed on Friday, becoming the biggest bank to do so since the financial crisis of 2008, upsetting markets and leaving investors and companies holding billions of dollars stranded. There were growing worries that if regulators did not find a buyer to shield uninsured deposits, trouble may spread to regional banks in the United States.
Attempts were made over the weekend to identify a different bank willing to merge with Silicon Valley Bank by the Federal Deposit Insurance Corporation (FDIC), the receiver appointed in the case, according to sources with knowledge of the situation on Friday.
On Sunday, Yellen stated that she was closely coordinating with banks authorities to safeguard depositors, but she ruled out a government bailout.
Yellen said on the CBS News Sunday Morning program, “We want to make sure that the problems that exist at one bank don’t spread to others that are sound.
Let me be clear: During the financial crisis, investors and owners of very major banks were bailed out, but thanks to the changes implemented, she added, we won’t be doing that again.
Speaker of the House of Representatives Kevin McCarthy stated on Fox News’ Sunday Morning Futures show that the Federal Reserve and the Biden administration were working on an announcement before the markets opened but did not provide any other information.
Unable to ascertain whether a deal for the bank was imminent, Reuters. Industry executives claimed that such a transaction would be sizable for any bank and that authorities would probably need to provide additional guarantees and make other accommodations for any buyer.
They spoke on the condition of anonymity since the situation is fluid because the Santa Clara, California-based lender was the 16th-largest U.S. bank with $209 billion in assets, which made the list of prospective purchasers who may complete a deal over the weekend quite small.
According to Bloomberg, the U.S. Federal Reserve and the FDIC were considering establishing a fund that would enable regulators to support more deposits at banks that experience difficulties.
According to the report, regulators spoke with banking executives about the new special vehicle in the hopes that it would comfort depositors and lessen any possible panic.
Regulators’ ability to provide a lifeline to the bank, which caters to Silicon Valley startups and investors, remained uncertain, though.
On Saturday, the White House announced that President Joe Biden had discussed the bank and measures being taken to address the situation with California Governor Gavin Newsom. To immediately fix the issue, “everyone is working with FDIC,” Newsom stated on Saturday.
