Silicon Valley Bank bankruptcy: US authorities put the bank up for auction

Silicon Valley Bank bankruptcy: US authorities put the bank up for auction

The countdown begins. US authorities have auctioned off the bankrupt bank Silicon Valley Bank (SVB) with the aim of finding a buyer before the Asian markets open on Monday. In the aftermath, they announced that they would allow the withdrawal of all deposits from the bank. An extraordinary decision to reassure individuals and businesses.

According to the Washington Post, the deadline for submitting offers has been set for Sunday 7 p.m. GMT (8 p.m. in Paris). Asked, the Deposit Guarantee Agency (FDIC), which initiated the sale, declined to comment. The elected Democrat in the House of Representatives Josh Harder confirmed the auction to the Axios news site, believing that the limit could be pushed back to give potential buyers time to study SVB’s accounts.

“We want to make sure that the problems that affect one bank do not create contagion for others that are solid,” US Finance Minister Janet Yellen said on Sunday in an interview with CBS, before several media reports. Americans mention the auction process. “I am sure (the FDIC) is considering a wide range of solutions, which includes an acquisition” by another bank, said the Treasury Secretary.

The big banks so far spared

An emanation of the US government, the FDIC took control of Silicon Valley Bank on Friday, on the verge of implosion under the effect of massive withdrawals from its customers. The race against time initiated by the American authorities recalls the weekend of September 13 and 14, 2008. They had then failed to find a buyer for the bank Lehman Brothers, pushing it to file for bankruptcy on Monday, with dramatic consequences for the financial sector and the economy as a whole.

If the big banks have so far been spared, several American establishments of medium or regional size unscrewed on the stock market on Friday, fled by worried investors. This is particularly the case of the Californian First Republic, which dropped nearly 30% in two sessions, Thursday and Friday, or Signature Bank, cut by a third of its value since Wednesday evening.

The two institutions, like SVB, have a large proportion of companies in their client portfolio, whose deposits often exceed the maximum amount insured by the FDIC, or $250,000 per depositor, which could lead them to withdraw their funds. Some 96% of deposits housed at SVB are not covered, according to data published by the institution.

Allow customers to withdraw all of their deposits

In addition to the stability of the banking system, many are concerned about the repercussions of the SVB bankruptcy on the technology sector, American but also beyond. SVB boasted that its clients were “nearly half” of technology and life sciences companies financed by American investors.

In the event of failure to find a buyer, to avoid panic among customers of other banks and send a strong signal, the American authorities planned to guarantee all of SVB’s deposits. They amounted to around 170 billion dollars, according to a document published Wednesday by the establishment, but colossal withdrawals have taken place since. Some $42 billion in withdrawal orders were placed on Thursday alone, but not all of them could be honored. On Sunday, the US authorities announced that they would allow customers of the bankrupt bank to withdraw all of their deposits.

The measure was taken by Treasury Secretary Janet Yellen and announced jointly with the Federal Reserve (Fed) and the Deposit Guarantee Agency (FDIC), after consultation with US President Joe Biden, according to a statement.

“A lot of depositors are small businesses that need to be able to access their funds to pay their bills and they employ tens of thousands of people” in the United States, Janet Yellen previously explained. “It is a problem and we are working with regulators to find a solution,” she continued. This Sunday, British Finance Minister Jeremy Hunt said the fall of SVB posed a “serious risk” to his country’s tech sector.

Janet Yellen ruled out a bailout of SVB on Sunday via an injection of public money. “During the financial crisis (of 2008), investors in large systemic banks”, whose fall the authorities believe would pose a risk to the entire financial system, “were rescued” by the American government, a-t- she called back. “We’re not going to do it again. »

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