The Federal Reserve and the US Treasury announced an emergency line of credit to support banks in the country in the amount of $25,000 million. The goal is to stop the infection of the rest of the system after the Silicon Valley bank collapse.
Plans have appeared yet The Federal Reserve and the FDIC (The Federal Deposit Insurance Corporation, the American equivalent of the Guarantee Fund), announced this morning that clients of the failed bank would get back all of their money, even those that weren’t protected by the fund.
“Depositors will have access to all of their funds starting Monday, March 13th,” he said Department of the Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation in a joint statement. The taxpayer will not bear any losses associated with the Silicon Valley bank’s decision.
The announcement capped a frantic weekend that began Friday with news of the intervention and default of Silicon Valley Bank, the biggest failure of a US bank since the 2008 financial crisis.
Find buyers for Silicon Valley Bank
The FDIC first attempted to orchestrate the sale of the Silicon Valley bank and solicited bids from potential buyers. However, the organizers realized that the timing was too tight.
An interested person would hardly have room to review the books of the collapsed entity and be ready to open on Monday morning, given the speed with which events unfolded.
For this reason, US regulators resorted to making an exception that allowed the Guarantee Fund to insure Silicon Valley bank deposits.
This is a loan facility that makes it possible to request credits directly from the Federal Reserve, once it is established that the borrowers cannot get the funds elsewhere. Use of this hotline requires approval by the Treasury Department headed by Janet Yellen.
Silicon Valley bank shareholders and unsecured debt holders are excluded from this protection.
$25 billion to support banks
In this way, the US regulators made available to banks an additional 25,000 million liquidity, which can be accessed through the “bank term financing programme”, according to the The Federal Reserve announced in a statement.
“This action will enhance the banking system’s ability to protect deposits and ensure a continued supply of money and credit to the economy,” the Fed said.
The program acts as a kind of “financing bridge” with a guarantee of high-quality securities, which will prevent banks from liquidating these securities at attractive prices in order to obtain liquidity.
The scale is also up SignatureBanka New York entity affected by the bankruptcy of Silicon Valley Bank.
The Fed said these measures will “reduce stress on the entire financial system, support stability, and minimize any impact on businesses, households, taxpayers, and the broader economy.”
HSBC bought a British branch of Silicon Valley bank for £1
Meanwhile, the British bank HSBC announced on Monday the purchase of the British branch of Silicon Valley Bank for one pound sterling, according to what was reported. The entity confirmed in a statement. The subsidiary has loans in the amount of 5,500 million pounds and loans in the amount of 6,700 million.
The agreement will be completed immediately and will be funded from the entity’s resources. “This acquisition makes excellent strategic sense for our UK business,” Chief Executive Noel Quinn said in the statement.
“It strengthens our commercial banking franchise and enhances our ability to serve fast-growing and innovative companies, including technology sectors, in the UK and internationally.”
As a result of this process, all Silicon Valley bank depositors’ funds are insured in the UK.
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