The US administration will not bail out the bankrupt Silicon Valley Bank (SVB), but is working to support its depositors, Treasury Secretary Janet Yellen said in an interview with CBS.
According to the head of the Ministry of Finance, the bank’s bankruptcy differs from the situation in 2008, when the country’s leadership had to support many financial organizations in order to save the banking sector. “During the financial crisis, investors and owners of systemically important large banks were rescued. And the reforms that have been made mean that we are not going to do it again. But we care about contributors and are focused on meeting their needs,” Yellen said.
The head of the Ministry of Finance did not disclose the details of the measures planned by the government. She ured that the bankruptcy of SVB would not cause a domino effect in the financial market, as “the American banking system is sound and well capitalized” and stable. That said, Yellen added that regulators want to make sure that SVB problems do not lead to the spread of the crisis.
On March 11, The ociated Press reported that California-based Silicon Valley Bank had filed for bankruptcy. The agency noted that this was the second largest bankruptcy in US history after the closure of Washington Mutual in 2008.
The bank was one of the 16 largest banks in the country and specialized in working with start-ups. Among those affected by the collapse of the California bank was including the Internet TV provider Roku: according to the publication, about 26% of its funds ($487 million) were placed in SVB, and the deposits were not insured.
As part of the seizure, California banking regulators and the Federal Deposit Insurance Corporation (FDIC) transferred the bank’s ets to a newly created institution, the Santa Clara Deposit Insurance Bank. Payments of insured deposits will begin on Monday, notes AP. After that, the regulators intend to sell the rest of the bank’s ets to save the funds of other depositors.
The publication attributed SVB’s problems to its ties to tech companies, which suffered after a surge in growth during the pandemic and subsequent layoffs. In addition, the position of the financial institution was affected by the struggle of the Federal Reserve System with inflation and a series of aggressive interest rate increases, as a result of which the value of bonds falls.