Companies and Markets

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

The U.S. Federal Deposit Insurance Corporation is reportedly holding an auction for the assets of failed Silicon Valley Bank of California this weekend, while discussions are also said to be underway involving the Federal Reserve to possibly create a fund to protect depositors.

Meanwhile, the U.K. government said Sunday it was working on a lifeline for companies that had deposits locked up at Silicon Valley Bank’s British arm.

The FDIC began an auction process late Saturday for Silicon Valley Bank, with final bids due by Sunday afternoon, Bloomberg reported Sunday.

The FDIC is hoping for a quick deal but a winner may not be known until late Sunday, and it is possible no deal will be reached, sources told Bloomberg. Representatives for the FDIC didn’t immediately respond to requests for comment.

Silicon Valley Bank, the 16th largest lender in the U.S., collapsed into FDIC receivership on Friday, after its customer base of technology startup businesses became concerned and withdrew deposits. At the end of last year, SVB had more than $175 billion in deposits, most of which are uninsured, and also held $209 billion in total assets. Trading in shares of SVB

were halted on Friday amid reports it’s seeking a buyer.

See: Silicon Valley Bank branches closed by regulator in biggest bank failure since Washington Mutual

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

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

The Fed and the FDIC, which is charged with protecting depositors of insured U.S. banks, have been talking to financial institutions about a way to quell panic as questions hang over how some Silicon Valley Bank customers will get their money back.

The FDIC, which insures deposits of up to $250,000 at eligible banks, has said that all insured depositors will have full account access no later than Monday morning, but customers with more than $250,000 in their accounts have been given an FDIC hotline to call.

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

Read: Silicon Valley Bank failed for one simple reason: its key startup clients lost faith.

Some analysts are now questioning whether similar problems could be lurking at other institutions. Many small and midsize lenders were queried on Saturday by FDIC officials who were seeking information about their financial soundness, Bloomberg reported, citing sources.

First Republic Bank

shares were among those in the sector under pressure last week, resulting in a statement on Friday from the bank assuring its “continued safety and stability and strong capital and liquidity positions.” 

Read: 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 the alarm bells now ringing in the wake of Silicon Valley Bank’s collapse could cause wealthy clients to pull their money from regional and midsize banks, in favor of bigger institutions such as JPMorgan
some banking sources told The New York Post.

U.S. Treasury Secretary Janet Yellen said Sunday on CBS’ “Face the Nation” that the government won’t be bailing out the failed bank, with officials focused on how to help depositors concerned about their funds. Yellen said Friday that the Treasury was watching a few banks “very carefully” in wake of the Silicon Valley Bank fallout.

Read: As Silicon Valley Bank concerns grow, Yellen says she has been ‘working all weekend with our banking regulators to design appropriate policies’ to address depositors

Meanwhile, the U.K. government said Sunday it was working on a lifeline for companies that had deposits locked up at Silicon Valley Bank’s British arm, the Wall Street Journal reported.

In a statement, the U.K. Treasury said that it wanted to “avoid or minimize damage to some of our most promising companies,” adding the plan would ensure their short-term operational and cash flow needs were covered. 

Late Friday night the Bank of England said it planned to place SVB’s U.K. subsidiary into an insolvency procedure on Sunday and it will pay out depositors “as quickly as possible.”

Under the U.K.’s insolvency procedure, deposits up to £85,000 in individual accounts, equivalent to around $102,000, and up to £170,000 in joint accounts will be returned to customers, the Bank of England said. Other assets and liabilities of the bank will be managed by bank liquidators and recoveries will be distributed to creditors.

British tech companies raised £24 billion last year, the third-most after the U.S. and China, according to figures from Dealroom. BeZero Carbon Ltd., a London startup that provides a credit-rating service for carbon offsets, was one of them. The company’s chief executive, Tommy Ricketts, said it closed a $50 million funding round in November and roughly half the money was in its Silicon Valley Bank account as of last week.

The bank’s 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 U.S. stock market open, with investors expected to watch closely how trading begins in Tokyo and across Asia later on Sunday.

Major U.S. indexes suffered losses of more than 4%, with the Dow Jones Industrial Average

suffering its worst week since June on Friday as fears of ongoing contagion in the banking sector added to ongoing concerns over the economy.

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


Business Asia
the authorBusiness Asia

Leave a Reply