Over the weekend, the Silicon Valley Bank, one of the most prominent financial institutions in the global tech sectors, suffered a sudden, brutal collapse. The collapse resulted from a weekend bank run, where scores of investors attempted to pull their funds out of the bank simultaneously, driving its values into the ground and forcing a shutdown. With the bank inactive, tech and startup companies have expressed concerns about making payroll, but the Federal Reserve is making plans to ensure a relatively smooth transition.
In a joint statement over the weekend, Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and Federal Deposit Insurance Corporation Chairman Martin J. Gruenberg pledged to make all SVB deposits available to their owners today, including both owned funds and insured funds.
“The US banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the [2008] financial crisis that ensured better safeguards for the banking industry,” the regulators said. “Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”
“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out … and the reforms that have been put in place means that we’re not going to do that again,” Yellen said in a separate interview with CBS. “But we are concerned about depositors and are focused on trying to meet their needs.”
‘No doubt’ that more banks will fail after Silicon Valley Bank’s implosion, says the FDIC chair who oversaw part of the 1980s banking crisishttps://t.co/mpWdvGMbsI
— Insider Business (@BusinessInsider) March 13, 2023
While this will likely be a difficult and strenuous process, analysts generally believe this is the right move to make, given the circumstances.
“Monday will surely be a stressful day for many in the regional banking sector, but today’s action dramatically reduces the risk of further contagion,” Jefferies analysts Thomas Simons and Aneta Markowska said in a note to investors obtained by CNN.
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