Sunday – 27 Shaaban 1444 AH – March 19, 2023 AD
San Francisco (United States): «Asharq Al-Awsat»
A consortium of medium-sized US banks asked the Federal Banking Regulatory Authority to guarantee all their customers’ deposits for two years, even for amounts exceeding the $250,000 limit, to avoid the transmission of the Silicon Valley bankruptcy infection, according to Bloomberg Agency, yesterday (Saturday). ).
The “Medium-Sized Banks Alliance in America” (MBCA) said in a letter to the authorities, according to the agency’s report, that this measure would “immediately stop the flight of deposits from smaller banks, lead to the stability of the banking sector, and significantly reduce the possibilities of the collapse of banks.” More banks.
The bankruptcy of Silicon Bank (SVB) and Signature Bank caused a crisis of confidence in this sector.
Many customers of banks of comparable size have withdrawn their money and deposited it in larger institutions, such as JPMorgan or Bank of America, which are too big for the government to ignore bailing out in the event of a collapse.
This week, the market value of First Republic Bank, which mainly serves high-net-worth clients, plunged by 80 per cent, amid fears of a contagion collapse. The bank ranks 14th among the largest US banks in terms of assets.
Currently in the US, deposits are protected by the banking regulator, the Federal Deposit Insurance Corporation (FDIC), up to $250,000.
“Despite the health and safety of the banking sector in general, confidence in all but the largest banks has eroded,” Bloomberg quoted the coalition of banks as saying.
In particular, the coalition called on the FDIC, the Federal Reserve, and Treasury Secretary Janet Yellen to work to “immediately restore confidence.”
The group of banks proposes to finance this procedure itself, by increasing the amount of contributions paid by banks to the FDIC.
On Thursday, 11 major US banks pledged to deposit a total of $30 billion in First Republic accounts.
Bank of America, Citigroup, JPMorgan Chase and eight other institutions hope to show their confidence in the country’s banking system, according to a joint statement.
Press France could not immediately reach the coalition of banks and authorities for comment.