All SVB depositors will get their funds as US regulators seek to boost confidence
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Authorities in the United States announced a series of emergency measures that could be taken to boost confidence in the US banking system. The authorities are taking these measures to boost confidence in the banking industry after the demise of Silicon Valley Bank, which threatened to cause a crisis across the financial sector.
US regulators rush to boost confidence in the US banking system
There was much activity over the weekend after the crisis at Silicon Valley Bank. Following the collapse of this bank, US financial market regulators have said that the customers at the failed bank would access all their deposits from Monday. Additionally, the bank would create a new facility to give US banks access to emergency funds.
The Federal Reserve will also make it easier for banks to borrow funds to be used for emergencies. The Federal Reserve and other regulators have been keen to ensure that the contagion from the SVB fallout is limited.
Despite the efforts to offer relief to the firms in Silicon Valley that banked with SVB, there are still significant risks in the broader banking industry. There are doubts over the measures that the Federal Reserve will take to guarantee no more fallout while maintaining the efforts to control the skyrocketing inflation levels.
SVB is not the only bank that has been closed by US authorities this past weekend. The authorities also moved swiftly to shut down Signature Bank, which was facing intense pressure in recent weeks.
The US Treasury Secretary, Janet Yellen, issued a joint statement alongside the Fed Chair Jerome Powell and the chair of the Federal Deposit Insurance Corp Martin Gruenberg, said that all SVB depositors, including those with funds that exceeded the maximum government-insured threshold, would be made whole.
A senior official at the US Treasury said that the measures taken would protect the depositors and support the banking industry. The official noted that the measures being taken did not constitute a bailout. Instead, the regulators were protecting depositors. The Deposit Insurance Fund would carry the risk of protecting depositors.
Questions over interest rate hikes
There are questions over whether the Federal Reserve will continue with the aggressive interest rate hikes. Some experts believe the Fed will slow down these rate hikes because of the risks currently evident in the banking industry.
The Fed was expected to hike rates in the next policy meeting that will take place on March 21-22. Analysts at Goldman Sachs have said they are no longer expecting an interest rate hike in the next FOMC meeting as the Fed seeks to mitigate the stress in the banking industry. Analysts had expected rates to be hiked by 25 basis points in this meeting.
The interest rate hikes introduced by the Federal Reserve and other global central banks over the past year to tame inflation have stressed the financial system and the global market.
