Silicon Valley Bank: Biden says US banking system is safe

President Joe Biden has said the US will do “whatever is needed” to shore up the banking system after a string of bank failures raised concerns about financial stability.

His comments came after the government said it would guarantee all deposits at Silicon Valley Bank and Signature Bank.

It is trying to keep bank runs from spreading after SVB collapsed amid a rush of customer withdrawals.

Americans should “rest assured that our banking system is safe”, Mr Biden said.

People and businesses who have money deposited with SVB would be able to access all their cash from Monday, he said.

Taxpayers will not bear any losses from the move, which will be funded by fees regulators charge to banks, he said. The banks’ leaders will be fired, he added.

Mr Biden spoke early on Monday, as the failures of SVB – the country’s 16th largest bank- and Signature raised concerns that it could spark a financial crisis.

“Every American should feel confident that their deposits will be there if and when they need them,” President Biden said. “Let me also assure you we will not stop at this. We’ll do whatever is needed.”

SVB – which specialised in lending to technology companies – was shut down by regulators who seized its assets on Friday. It was the largest failure of a US bank since the financial crisis in 2008.

It came after SVB was scrambling to raise money to plug a loss from the sale of assets affected by higher interest rates. Word of the troubles led customers to race to withdraw funds leading to a cash crisis.

Authorities on Sunday also said they had taken over Signature Bank of New York, which had many clients involved in crypto and was seen as the institution most vulnerable to a similar bank run after SVB.

There is concern that the failures, which came after the collapse of another bank, Silvergate Bank, last week, are a sign of troubles brewing for other firms.

US financial markets were roughly flat as trading opened on Monday.

But shares of many banks were under pressure. Shares in First Republic bank, which is based in San Francisco, plunged roughly 70% on Monday, as investors sold off shares, worried it could be next.

As part of their moves to restore confidence, regulators also unveiled a new way to give banks access to emergency funds.

The Federal Reserve said it would offer assistance through a new Bank Term Funding Program, making it easier for banks to borrow from it in a crisis.

Elsewhere, HSBC said it was buying the UK arm of SVB for £1, while authorities in Canada took temporary control of the assets of SVB’s branch in the country. The top banking regulator said it intended to seek permanent control.

Paul Ashworth, chief North America economist at Capital Economics, said the US authorities had “acted aggressively to prevent a contagion developing”.

“Rationally, this should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age. But contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work,” he added.

I’ve been speaking to people with money stuck in SVB over the weekend.

One founder told me had been constantly refreshing his online banking page, hoping it might work.

Another said he was confident the government would step in, but admitted he might have lost about around 40% of the company’s cash overnight.

This statement, then, has been welcomed by depositors. But there are those that will raise eyebrows at this move.

SVB mainly banked start-ups and venture capitalists in Silicon Valley – the tech elite. And those Silicon Valley elites tend to have more than a streak of libertarianism to their politics: the boilerplate view is that government is slow and too big.

Critics argue that it’s with great irony that it’s the government who has stepped in to save the day. Some will wonder whether influential tech bros have been given preferential treatment: capitalism for when things go well, socialism for when it doesn’t.

It’s why the statement is worded carefully that taxpayers will not be paying for this. Mr Biden will now have to defend the move – and reassure members of his own party that guaranteeing depositors was the only way.

SVB started as a California bank in 1983 and expanded rapidly over the last decade. A crucial lender for early-stage businesses in the tech sector, it was the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year.

The firm came under pressure last year, as its customers increasingly drew on deposits, because higher interest rates were making it more difficult to bring in new money through private fundraising or share sales.

In Silicon Valley, the reverberations from the collapse have been widespread as companies face questions about what it means for their finances.

Etsy and Roku were among the big-name companies that had money tied up in the bank.

“At Etsy, supporting our sellers is our highest priority, and we understand how important it is for these small businesses to be able to receive their funds when they need them,” an Etsy spokesperson said on Sunday.

“We recently experienced a delay in issuing payments to some sellers related to the unexpected collapse of Silicon Valley Bank. Our teams have been working around the clock to implement a solution.

“We expect to pay sellers via our other payment partners within the next several business days and that we will be able to begin processing these payments as soon as tomorrow, March 13.”