Americans can ‘trust’ a ‘sound’ banking system, and it will ‘do whatever it takes’ to keep it that way: Joe Biden on Monday sought to address concerns over the collapse of the Californian bank SVB. “We will not stop there” and “we will do whatever is necessary”, he assured after the American authorities placed this establishment close to the technological circles under guardianship and intervened in all haste in the face of bankruptcy. of two smaller banks.
The American president, during a short and solemn speech at the White House, made it known that he would ask Congress to legislate to “strengthen” banking regulation, toughened after the debacle of Lehman Brothers in 2008, but then lightened by his predecessor Donald Trump. The 80-year-old Democrat, already campaigning without saying so for 2024, also assured that American taxpayers would not be called upon to deal with the turbulence of the moment.
If bank deposits are guaranteed, Joe Biden assured that investors and shareholders would not be “protected” against the losses incurred. The American president must fuel the most precious resource in the markets: confidence, the only bulwark against a large-scale contagion of the troubles of Silicon Valley Bank (SVB). The authorities have taken measures in the United States and Europe to protect the deposits of this Californian establishment, bankrupt and placed under public guardianship on Sunday.
The star indices of the main European markets suffered on Monday, with declines ranging from 2 to 3% or even beyond for the main indices, and banking stocks suffered sharp declines. On Sunday, US authorities announced that they would guarantee the withdrawal of all deposits from the bankrupt Californian bank. The American authorities will also allow access to all the deposits of another establishment, Signature Bank, which has been closed automatically by the American regulator.
In addition, the Federal Reserve – the Fed, the American central bank – has undertaken to lend the necessary funds to other banks that may need them to honor withdrawal requests from their customers. London, for its part, announced that the British branch of SVB had been sold to the British banking giant HSBC, for a symbolic pound. “SVB UK customers will be able to access their deposits and banking services normally from today,” said the British Treasury.
The authorities want at all costs to avoid a panic on the markets on Monday and mass withdrawals of bank customers, a “bank run” with potentially devastating effects. The SVB debacle illustrates the disruption of the entire US banking system in the face of Fed monetary tightening. The bearings of Interest rates in the United States have encouraged customers to invest their money in financial products that pay better than checking accounts, drying up a crucial source for the cash-hungry new technologies sector.
This wave of bank withdrawals brought three banks to their knees last week: SVB, Signature Bank and also Silvergate Bank, which is smaller but known for its privileged links with the cryptocurrency community. At the same time, the American authorities put SVB up for auction with the aim of finding a buyer as soon as possible. The race against the clock this weekend recalls September 13 and 14, 2008. The American authorities had failed to find a buyer for Lehman Brothers and refused to intervene, pushing the bank to file for bankruptcy, with dramatic consequences for the financial sector and the global economy as a whole.
In Germany, the banking supervisor Bafin assured Monday that the bankruptcy of SVB did not constitute “a threat to the financial stability” of the country. French Economy Minister Bruno le Maire also said he “saw no risk of contagion” for establishments in the country.