US and UK regulators considering ways to help SVB depositors and FDIC auction assets: reports

The US Federal Deposit Insurance Corporation is reportedly holding an auction of the assets of the bankrupt Silicon Valley Bank of California this weekend, while talks are also reportedly underway involving the Federal Reserve to possibly set up a fund to protect investors. depositors.

Meanwhile, the UK government said on Sunday it was working on a lifeline for companies that had deposits blocked at the UK branch of Silicon Valley Bank.

The FDIC launched a bidding process Saturday night for Silicon Valley Bank, with final bids expected 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’s possible no deal is reached, sources told Bloomberg. FDIC officials did not immediately respond to requests for comment.

Silicon Valley Bank, the 16th largest lender in the United States, was placed in receivership by the FDIC on Friday after its clientele of tech start-ups grew concerned and withdrew their deposits. At the end of last year, SVB held more than $175 billion in deposits, most of which are uninsured, and also held $209 billion in total assets. SVB SIVB stock trading,
were discontinued on Friday amid reports that it is looking for a buyer.

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

The FDIC is working to sell the assets and make a portion of uninsured customer deposits available as of Monday, sources said. The agency said it would make 100% of insured deposits available on Monday when branches of Silicon Valley Bank reopen.

Meanwhile, talks are also reportedly underway between the Federal Reserve and the FDIC to possibly set up a fund to protect more depositors from other troubled banks, following the country’s first bank failure since late 2020, also reported. reported Bloomberg.

The Fed and FDIC, which are charged with protecting depositors at insured U.S. banks, have been talking with financial institutions about a way to ease the panic amid questions looming over how some Silicon Valley Bank customers will recover. their money.

The FDIC, which insures deposits up to $250,000 at eligible banks, said all insured depositors will have full account access by Monday morning, but customers with more than $250,000 in their accounts have received an FDIC hotline to call.

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

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

Some analysts are now wondering whether similar problems might be lurking at other institutions. Many small and medium-sized lenders were questioned on Saturday by FDIC officials seeking information on their financial strength, Bloomberg reported, citing sources.

Bank of the First Republic FRC,
The shares were among those in the sector under pressure last week, prompting a statement on Friday from the bank assuring its “continued safety and stability and strong capital and liquidity positions”.

Read: UBS analyst says First Republic ‘not an SIVB’ as stock stabilizes

And: 20 banks that are sitting on huge potential securities losses, just like SVB

One of the fears is that the alarm bells now ringing following the collapse of Silicon Valley Bank could cause wealthy customers to withdraw their money from regional and mid-sized banks, in favor of large institutions such as that JPMorgan JPM,
some banking sources told the New York Post.

US Treasury Secretary Janet Yellen said on CBS’ “Face the Nation” on Sunday that the government would not bail out the failed bank as officials focused on how to help depositors worried about their funds. Yellen said on Friday that the Treasury was watching a few banks “very carefully” in the 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 UK government said on Sunday it was working on a lifeline for companies that had deposits blocked at the UK branch of Silicon Valley Bank, The Wall Street Journal reported.

In a statement, the UK Treasury said it wanted to “avoid or minimize damage to some of our most promising businesses”, adding that the plan would ensure that their short-term operational and cash requirements are covered.

Late Friday night, the Bank of England announced that it planned to place SVB’s UK subsidiary in insolvency proceedings on Sunday and would reimburse depositors “as soon as possible”.

Under the UK’s insolvency proceedings, deposits of up to £85,000 in individual accounts, around $102,000, and up to £170,000 in joint accounts will be returned to customers, a said the Bank of England. The other assets and liabilities of the bank will be managed by bank liquidators and the collections will be distributed to creditors.

UK tech companies raised £24bn last year, third after the US and China, according to figures from Dealroom. BeZero Carbon Ltd., a London startup that provides a credit scoring 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 about half the money was in his account at Silicon Valley Bank as of last week.

The bank’s website says it also has branches in Canada, China, India, Sweden, Denmark, Germany and Israel.

The banking crisis has investors on edge ahead of Monday’s U.S. stock market open, with investors set to watch closely for the start of trading in Tokyo and across Asia later on Sunday.

Major U.S. indices suffered losses of more than 4%, with the Dow Jones Industrial Average DJIA,
had its worst week since June on Friday, as fears of continued contagion in the banking sector added to lingering worries about the economy.

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

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