The main assets of Silicon Valley Bank are sold, the authorities are working on the issue of targeted support for First Republic Bank, but “the U.S. banking system remains sound and resilient.”
Representatives of the Federal Reserve Bank of New York spoke at a special meeting of the U.S. Treasury Department’s Financial Stability Oversight Council (FSOC). A press release was issued after the meeting, noting that “while some institutions have come under stress, the U.S. banking system remains sound and resilient.”
Details of the meeting weren’t detailed in the document, a point already made by Congressmen Andy Barr and Bill Huizenga, members of the House Financial Services Subcommittee. Politicians sent an official letter to Janet Yellen, Secretary of the Treasury and Chairperson of the FSOC, criticizing the “transparency” of the FSOC and demanding unedited minutes and other details of the agency meetings on March 10 and 12 regarding the destabilization of the banking sector.
It also became known that all the deposits, loans, and branches of the “bankrupt” Silicon Valley Bank had been bought out by First Citizens Bank. The deal was announced by the Federal Deposit Insurance Corporation (FDIC). The deal amounted to $72 billion at a discount of $16.5 billion. The FDIC will retain control of the securities and other assets of SVB worth ~$90 billion.
As Bloomberg reports, the struggling First Republic Bank may receive additional support from the U.S. authorities. According to the publication, the regulators recognized First Republic as “stable enough to operate” without the need for an “immediate intervention,” but in case of need, the bank can be allocated “an emergency credit line” from the Fed.
The banking meltdown, however, led to an inflow of more than $286 billion into money market funds over the past two weeks. The Financial Times reports this, citing data from Emerging Portfolio Fund Research (EPFR). Money market funds involve high-liquid, low-risk investments in cash and short-term debt securities. Large banks, which recorded a large inflow of funds into the respective funds, benefited from this:
- Goldman Sachs — $52 billion;
- JPMorgan — $46 billion;
- Fidelity — $37 billion.
Recall that the crisis phenomena in the U.S. banking system began with the “voluntary liquidation” of Silvergate Bank and intensified after the shutdown of Silicon Valley Bank and Signature Bank by the regulators. Such a situation provoked an outflow of funds from the accounts of other banks, and as a result, regional banks in the United States were seriously affected. The situation spread to Europe, where the Swiss authorities had to urgently “rescue” the country’s second-largest bank.
