Government of the U.S. Moves to Block Potential Banking Crisis

The government of the U.S. took steps on Sunday to stop a possible banking crisis after the massive failure of Silicon Valley Bank and assured all customers of the institution that they would be able to access their money soon, as yet another major bank was shut down.

To increase confidence in the banking system, the FDIC, Treasury Department, and Federal Reserve said on Sunday that all clients of Silicon Valley Bank would be able to access their money and be protected. They also assured customers that steps are meant to prevent additional bank runs and protect the bank’s customers.

The announcement came during growing fears that the factors that caused the bank to fail could spread to other financial institutions.

In a signal of how quickly the financial bleeding was happening, regulators announced that Signature Bank, a New York-based bank, was being seized Sunday after failing. With more than $110 billion in assets, Signature Bank is the third-biggest bank to fail in U.S. history.

The possible crisis caused U.S. regulators to intervene to keep Asian markets from reflecting the financial jitters. Japan’s Nikkei 225 index fell 1.6% in morning trading, while South Korea’s Kospi lost 0.4%, and Australia’s S&P/ASX 200 lost 0.3%. However, the Shanghai Composite rose by 0.3%, and Hong Kong’s Hang Seng increased by 1.4%.

“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” said the agencies in a joint statement.

With the plan, Signature Bank and Silicon Valley Bank customers, including those with accounts that exceed the $250,000 insurance limit, should be able to access their funds on Monday.

Another struggling bank boosts financial health through funds from other banks

Sunday, First Republic Bank, another struggling bank, announced that it had boosted its financial health by gaining access to funds through JPMorgan Chase and the Fed.

In another Sunday announcement, the Fed said a wide-reaching emergency lending program that is intended to put a stop to a wave of possible bank runs that could threaten the stability of the economy as a whole and the banking system. Fed officials have said the program is similar to what central banks have done for years — lending freely to the banking system so that clients would remain confident that they are able to access accounts when needed.

Banks will be allowed to use the lending facility to raise cash to pay depositors to borrow money from the Feds instead of selling securities, including Treasuries, to raise funds. Silicon Valley Bank had to get rid of some of its Treasuries at a loss to fund withdrawals made by customers. With the new Fed program, banks can borrow from the emergency facility by posting the securities as collateral.