by Charlie Gasparino, senior correspondent for FOX Business, offers an expert analysis of the historic collapse of the Silicon Valley bank and its far-reaching economic ramifications.
An internationally coordinated effort between the US and UK governments has led to the sale of a subsidiary of Silicon Valley Bank following the collapse of the Santa Clara, California-based bank on Friday. Silicon Valley Bank is a financial institution with more than $200 billion in assets.
HSBC said it would acquire Silicon Valley Bank UK Ltd for £1 after both governments struggled to find a larger bank to buy in order to ensure the safety of £6.7 billion (£8.1bn) of deposits US dollars) to ensure.
The UK Treasury and Bank of England “facilitated the sale,” according to CFO Jeremy Hunt.
“This morning the Government and Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC,” Hunt said in a tweet early Monday morning.
BIDEN ‘PLEASED’ WITH FEDS’ RESPONSE TO SILICON VALLEY BANK COLLAPSE, PUTTING OFF SOON ADDRESS DEPOSITS AND CLOSURES
A sign of a branch of Silicon Valley Bank is pictured in an office building of the bank in Frankfurt, Germany, Monday, March 13, 2023. (AP Photo/Michael Probst/AP Newsroom)
“Deposits will be protected without taxpayer support. I said yesterday we will look after our technology sector and we have worked urgently to deliver on that promise,” said the MP representing South West Surrey.
British and American officials worked all weekend to find buyers for the bank and its subsidiaries, whose collapse was the second largest bank collapse in history.
While UK authorities successfully sold the subsidiary, US regulators have so far not done so, at least publicly. The Federal Deposit Insurance Corporation (FDIC) placed SVB in receivership Friday as the bank closed.
The FDIC then held an auction with the Treasury Department on Saturday, but it’s not clear when the results of the auction will be released.
Separately, the Treasury Department, the Federal Reserve and the FDIC on Sunday announced additional measures to prevent a possible financial crisis.
People look at signs posted outside an entrance to the Silicon Valley Bank in Santa Clara, California on Friday, March 10, 2023. (AP Photo/Jeff Chiu/AP Newsroom)
Shortly after SVB’s collapse on Friday — the second largest in US history after the 2008 collapse of Washington Mutual — New York-based Signature Bank collapsed on Sunday. This is the third largest bank failure in US history.
HOW THE SILICON VALLEY BANK WAS BURNED
To boost confidence in the banking system, regulators said all depositors in the failed institutions, Silicon Valley Bank and Signature Bank, would be protected and all their money insured, including those whose holdings exceeded the $250,000 insurance limit accessible Monday made.
They also announced steps to protect the bank’s customers and prevent further bank runs.
“This move will ensure that the U.S. banking system continues to fulfill its important role in protecting deposits and providing access to credit for households and businesses in a way that supports strong and sustained economic growth,” the agencies said in a joint statement Explanation.
Janet Yellen. (Reuters/Jonathan Ernst/Reuters Photos)
Analysts have said the Fed’s new measures should be enough to calm financial markets.
“Monday will certainly be a stressful day for many in the regional banking sector, but today’s measures are dramatically reducing the risk of further contagion,” forecast economists at investment bank Jefferies.
SILICON VALLEY BANK CLOSED BY REGULATORS
Sunday’s measures are the largest government interventions in the banking system since the 2008 financial crisis, albeit much smaller in scope and impact.
Taxpayers’ money will not be made available to hold deposits, the government said.
President Joe Biden said Sunday night, returning to Washington aboard Air Force One, that he would address Monday’s bank failures head-on.
US President Joe Biden delivers a speech in the Roosevelt Room of the White House on March 10, 2023 in Washington, DC. (Alex Wong/Getty Images/Getty Images)
He also said the federal government is “determined to hold those responsible for this mess fully accountable and to continue our efforts to strengthen oversight and regulation of larger banks so that we don’t find ourselves in that position again.”
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SVB began sliding into bankruptcy when customers, mostly technology companies, rushed for cash financing and withdrew their deposits.
The bank was forced to sell bonds at a loss to cover the withdrawals, and regulators were soon forced to take action.
The Associated Press contributed to this report
