Since the bankruptcy of Silicon Valley Bank (SVB) at the end of last week, the American authorities have been hitting hard to reassure individuals and businesses about the solidity of the American banking system caught in the turmoil. Monday at the start of the afternoon, the financial markets rocked strongly after this shock: -2.35% for the Paris Stock Exchange, -2.50% for that of Frankfurt, while that of Milan recorded -3.56% decline and that of London -1.82%.
US President Joe Biden spoke on the subject on Monday March 13 and the French and European authorities are reassuring. Update on the situation.
“No risk of contagion” in France and Europe
French banks “are not exhibited”said a spokeswoman for the Banque de France on Monday, confirming information from the French daily The Parisian.
Earlier in the day, the Minister of the Economy, Bruno Le Maire, had ruled out any risk of contagion. “I don’t see any risk of contagion, so there is no specific alert”he said on FranceInfo. “We have banks that are solid”, “a sound banking system” And “a cash ratio that is high”said Mr. Le Maire, adding that French banking establishments had “Very diversified sectors of activity”. “Calm down, calm down, and look at the reality! »he hammered in the afternoon in front of investors. “The reality is that the French banking system is not exposed to the SVB. There are no links between the different situations. in the United States and Europe.
Same reassuring speech across the Rhine, the German banking supervisor Bafin asserting that “the critical situation of the German branch of SVB does not pose a threat to financial stability (in Germany) »because she has no “not of systemic importance”.
The European Commissioner for the Economy, Paolo Gentiloni, also considered that the bankruptcy of the two American banks SVB and Signature Bank did not represent “not a significant risk” for the EU financial system. “There is no direct contagion and the possibility of an indirect impact is something we need to monitor but at the moment we do not see any significant risk”he said in Brussels, ahead of a meeting of eurozone finance ministers.
Guaranteed deposits in the United States
The American authorities announced on Sunday that they would guarantee all withdrawals of deposits from SVB. They will also allow access to all the deposits of its sister, the Signature Bank, which is automatically closed. The Federal Reserve (Fed), the US central bank, has agreed to lend funds to other banks that need them to honor withdrawal requests from their customers. This program is financed by 25 billion dollars (23.5 billion euros) from a Treasury reserve.
US President Joe Biden wanted to be reassuring on Monday morning, assuring that “Americans can be confident that the banking system is sound”. “Your deposits will be available when you need them”, he said from the White House. He also promised that American taxpayers would not be liable for losses from a bank failure, and called on Congress to ” to strenghten “ sector regulation. Earlier he said to himself “firmly committed to holding accountable those responsible for this mess.”
After the announcement on Friday of the takeover of the SVB by the Federal Deposit Insurance Corporation (or FDIC), the American Federal Deposit Guarantee Agency, the fate of deposits aroused concern: 96% of them were not covered by the traditional guarantee, which provides up to $250,000 per customer and per bank. The solution announced on Sunday protects depositors but will not prevent shareholders from losing all of their investments. It should also lead to the cancellation of certain debts.
At the same time, the authorities put SVB up for auction with the aim of finding a buyer as soon as possible. Treasury Secretary Janet Yellen ruled out any speculation that the institution would be rescued with public money.
Efforts to reassure the markets
The Fed, the Treasury and the FDIC assured in a press release that their initiative aims to allow the banking system to “continue to play its vital role of protecting deposits and providing access to credit for households and businesses”. “The banking system is much more resilient and on a much better footing than before the financial crisishammered a Treasury official. To be clear, the situation is not like 2008.”
The whole system bears witness to the turbulence threatening the American banking system. The wave of withdrawals caused the failure of three banks this week: SVB, Signature Bank and Silvergate Bank, smaller but known for its links to the cryptocurrency community. Signature Bank, meanwhile, is the 21e American bank, with assets estimated by the Fed at 110 billion dollars at the end of 2022. Its failure is the third largest in the history of the United States, behind SVB and Washington Mutual, in 2008.
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The Fed also announced on Monday that it will review the terms of supervision and regulation of the SVB. “Events surrounding Silicon Valley Bank require thorough, transparent, and timely analysis by the Federal Reserve”, said its president. The results will be published on 1er may. “We need to be humble and do a careful and thorough review of how we have overseen and regulated this business, and what we should learn from this experience”estimated for his part the vice-president of the institution in charge of banking regulation, Michael Barr.
UK branch of SVB sold to HSBC
The British branch of SVB was sold to the British banking group HSBC for 1 symbolic pound (1.13 euros), according to press releases from the British Treasury and HSBC published on Monday. As of March 10, SVB UK held around £5.5 billion in loans and £6.7 billion in deposits, according to HSBC, which says “the assets and debts of the parent companies of SVB UK are excluded from the transaction”.
Financial authorities in London have been active all weekend in order to reassure the markets and try to limit the damage for the technology sector, to which the bankruptcy filing of SVB poses a “serious risk”admitted Finance Minister Jeremy Hunt.
The tech sector in expectation
In addition to the stability of the banking system, the repercussions of the bankruptcy of SVB on the technology sector, American but also beyond, were considered worrying. SVB prided itself on having for customers ” almost half “ tech and life science companies backed by U.S. investors. SVB’s deposits were around $170 billion, according to a document released Wednesday by the institution, but considerable withdrawals have been made since.
“Many of the 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 USA) »noted Janet Yellen on CBS on Sunday.