U.S. bank stocks fell on Monday despite President Joe Biden's reassurances to Americans that the U.S. banking system is safe and that taxpayers will not bail out investors in two failed banks.
.jpg "Two banks fail in quick succession, but U.S. banking system remains safe")
"Americans can trust the banking system to be safe. Biden said, "Your deposits are safe." This was a five-minute statement from the White House as businesses opened for the new work week.
Officials took over the California- and New York-based Silicon Valley Bank and Signature Bank. Customers of both banks can get their deposits back.
Biden said: "Taxpayers will not bear any losses. The managers and investors of these banks will be punished.."
He said that the deposits of these customers will be held in an account held by the US government. Payments, which are regularly deposited with funds by various banks, in order to cover such emergencies.
He vowed to review what happened to the two banks.
Despite those reassurances, about $90 billion was wiped off U.S. bank stocks on Monday as investors worried about more bank failures. The most money was lost by mid-sized banks, like Silicon Valley Bank.
While shares of the largest U.S. banks including JP Morgan Chase, Citigroup and Bank of America, also fell on Monday, the sell-off was less dramatic. Since the financial crisis in 2008, large banks have been strictly regulated and repeatedly subjected to stress tests by regulators.
Bank stocks in Europe and Asia also fell on Monday.
Biden did not answer reporters' questions on Monday about the reasons for the bank's failures. but financial experts said both banks were affected by rising interest rates, which negatively affected the market value of most of their assets, such as bonds and mortgages secured by home loans. backed securities.
Banks do not lose money if they hold such notes to maturity. If they have to sell them to pay back depositors, the losses could get worse quickly.
Industry-wide, U.S. banks reported $620 billion in paper losses from higher interest rates at the end of last year, the Federal Deposit Insurance Corp reported.
The US Federal Reserve, the US central bank's equivalent, announced on Monday that it would review its oversight of Silicon Valley Bank in light of the bank's collapse.
We should be humble and learn from this experience, said Michael Barr, the Fed's vice chair, for supervision.
Biden said, "I am committed to holding those who created this mess accountable and to working to strengthen our oversight and regulation of large banks before we have to do it again."
The statement, which came after a meeting of officials from the top financial regulator, also said the Fed would also allow other banks to use emergency lending programs to provide additional stability to the broader banking system.
The Federal Deposit Insurance Corporation, which insures deposits of up to $250,000 and regulates financial institutions, said on Monday that it had moved all of Silicon Valley Bank's deposits to a new bank that it runs as a "bridging bank." The agency appoints the board until the bank runs smoothly.
"The Bank of England announced on Monday the sale of Silicon Valley Bank's UK arm to HSBC to stabilize the bank, "provide continuity of banking services; minimize disruption to the UK tech sector; and restore confidence in the financial system."
A statement from the Bank of England said all depositors' funds were safe and that Silicon Valley Bank's UK branch would continue to operate as normal.
"The measures follow the collapse of Silicon Valley Bank, which U.S. federal regulators took control of on Friday, as concerns about the bank's financial health led to simultaneous withdrawals of large numbers of depositors."
The collapse of the Silicon Valley bank, with about $200 billion in assets, was the second-largest bank failure in U.S. history. The bank helps fund venture capital firms, especially for technology companies.
A significant part of Signature Bank's clients are also in the tech sector, including cryptocurrencies. With assets of more than $100 billion, its collapse became the third-largest bank failure in U.S. history, after Washington Mutual, which collapsed in 2008, and Silicon Valley Bank, which just collapsed.