The president of the United States, Joe Biden, declared this Monday, March 13, that his government has taken the necessary measures to guarantee the security of his country’s banking system, after the collapse of Silicon Valley Bank, based in California, last week. . Meanwhile, the British multinational financial services, HSBC, announced that it bought the British subsidiary of that financial institution to stop the possible extension of its consequences.
It is the second largest bank failure in history. After the collapse last week of the Silicon Valley Bank, based in California, the president of the United States, Joe Biden, delivered a speech on Monday, March 13, in which he assured that the financial system of his country is “safe”, after the recent measures taken by your Government.
“Today, thanks to the swift actions of my Administration in recent days, Americans can have confidence that the banking system is secure. Your deposits will be there when you need them, small businesses across the country that have funds in these banks can breathe easy knowing they can pay their workers and pay their bills,” Biden said.
The president also asked Congress and regulators to “strengthen the rules” on financial institutions and assured that none of the bank failures will be a burden on taxpayers, but that the funds will come from bank commissions.
“There will be no losses borne by taxpayers. Instead, the money will come from the fees that banks pay to the deposit insurance fund (…) On Friday, the government regulator in charge, the Federal Deposit Insurance Corporation (FDIC), took control of Silicon assets Valley Bank and over the weekend took control of the assets from Signature Bank,” Biden said when explaining the measures taken by his Administration.
Likewise, the head of state ratified that he will hold those responsible for the bankruptcy of Silicon Valley “accountable.”
“The management of these banks will be fired. If the FDIC takes over the bank, the people who run it should no longer work there. Third, investors in the banks will not be protected. They risked knowingly and when the risk was not it paid off, investors lost their money. This is how capitalism works. And fourth, there are major questions about how these banks got into this circumstance. We must get full accountability for what happened and why those responsible can be held accountable accounts”, advanced the president.
HSBC buys UK subsidiary of Silicon Valley Bank after its collapse
The collapse of the Silicon Valley Bank, based in California, led this Monday, March 13, to the purchase of the British branch of that financial institution by HSBC in the United Kingdom. An attempt to stop the possible extension of the consequences.
The acquisition by the largest bank in Europe was made for the symbolic value of one pound sterling.
The bailout comes after a weekend in which the US and UK governments joined forces to find a buyer for the British subsidiary, saving a key backer of technology startups on British soil.
The move also guarantees the safety of around 8.1 billion dollars in deposits, as announced by the UK Treasury and the Bank of England.
Customers and companies that have deposits in the SVB of the British territory will be able to access them normally, the Government stressed.
“This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC. Deposits will be protected, without taxpayer support (…) I said we would take care of our technology sector and we have worked urgently to deliver on that promise,” said Britain’s Chancellor of the Exchequer, Jeremy Hunt.
The announcement came amid fears that the factors that caused the bankruptcy of the US-based bank could spread globally.
A taste of how quickly the effects could spread came on Sunday March 12 when banking regulators announced the bankruptcy and seizure of New York-based Signature Bank.
With more than $110 billion in assets, that was the third largest bank failure in US history.
What led to the bankruptcy of Silicon Valley in the US?
Experts say Silicon Valley Bank began heading toward insolvency when its clients, mostly technology companies in need of cash while struggling to obtain financing, began withdrawing their deposits.
The bank had to sell loss-making bonds to cover withdrawals, triggering the biggest collapse for a US financial institution since the height of a crisis, behind only the 2008 bankruptcy of Washington Mutual.
The SVB, in California, reported on March 8 that it was going to seek a capital increase to face its financial difficulties, which had led it to get rid of investments worth some 21,000 million dollars.
This situation led many clients to withdraw their funds and then the regulators had to close the bank on Friday, March 11, due to lack of liquidity.
Some top Silicon Valley executives pointed to the risks if Washington did not bail out the bankrupt organization, including that clients would make moves at other financial institutions in the coming days.
In fact, share prices have plunged in recent days in other banks that serve technology companies, including First Republic Bank and PacWest Bank.
But Treasury Secretary Janet Yellen stressed that Silicon Valley Bank’s central problem was rising interest rates, which the Federal Reserve has raised to combat inflation.
As a result, as rates rose, many of its assets, such as bonds or mortgage-backed securities, lost market value, he explained.
The possible financial crisis also caused nervousness in other markets, such as the Asian ones, when operations began on March 13.
Japan’s benchmark Nikkei 225 index sank 1.6% in morning trade, Australia’s S&P/ASX 200 lost 0.3% and South Korea’s Kospi lost 0.4%, although the Hang Seng The Hong Kong Composite rose 1.4% and the Shanghai Composite rose 0.3%.
Now the SVB bailout is being welcomed by UK government ministers, regulators and tech start-ups, who insist customers would be able to bank as normal.
Also, in the United States, in an attempt to reinforce confidence in the banking system, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation indicated that all Silicon Valley Bank clients would be able to access their money.
They also announced measures aimed at protecting the entity’s clients and avoiding additional bank moves.
With Reuters, AP and EFE
