Following the failures of Silicon Valley Bank and Signature Bank, bank regulators rushed to make all depositors whole. This includes deposits made through a special fund that exceed the FDIC insurance standard.
“Our banking system is solid, and Americans can feel sure that their savings will be there when they need them,” Janet Yellen said on Thursday, according to CNBC.
As part of its emergency steps in the aftermath of the crash, the Federal Reserve temporarily relaxed its borrowing restrictions. Banks seeking short-term borrowing might take advantage of the so-called discount window, which offers more liberal terms.
But, Republican lawmakers voiced worry that this decision might create a precedent for guaranteeing all deposits in the future. However, the economist admitted that this may not be the case in the future.
Uninsured deposits, she stressed, would only be reimbursed if their collapse “created systemic risk and major economic and financial ramifications.”
Significantly, the survey found that the majority of SVB’s clientele were small tech startups, venture capital organizations, and entrepreneurs with working capital. According to reports, SVB’s assets were not covered in 94% of cases.
Another reason clients are migrating to larger banks. Big American banks, such as JPMorgan and Citigroup, got many more account opening requests than smaller lenders. BeInCrypto previously reported on reports confirming this movement. Congress is now considering a variety of legislation proposals aimed at preventing the next Silicon Valley bank crisis. Meanwhile, both banks are being approached for purchase.
Senator Elizabeth Warren resorted to Twitter to express her dissatisfaction with the government’s role in the rescue of ‘crypto’ platforms. According to industry insiders, purchasers of Signature may be required to divest in crypto sectors. Meanwhile, significant US banks stepped in to prevent another bank from joining the SVB and Silvergate collapses.
Although its stock dropped this week, First Republic Bank secured $30 billion in capital on Thursday. According to rumors, some of the largest names in American finance interfered to preserve the regional bank, including JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp, and Goldman Sachs.
Yet, regulators and policymakers are investigating how social media and digital communications may have contributed to the failure of these mid-sized banks. And whether psychological banking has had an influence on traditional banking in the digital era.
The surge in web3 activity and the large market capitalization of cryptocurrencies have also been cited as contributing factors to the collapse, particularly because the now-defunct Silvergate Bank and Signature Bank were well-known for their vast industry contacts.
