The American banking system is “solid”, assures President Biden

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Americans can 'have confidence' in a 'sound' banking system, and it will do 'whatever is necessary' to keep it that way: Joe Biden strove on Monday 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 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 address at the White House, made it known that he would ask Congress to legislate to “strengthen” banking regulation, hardened after the Lehman Brothers debacle in 2008, but then eased 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” from the losses incurred.

The US president must nurture the most precious resource in the markets: confidence, the only bulwark against a large-scale contagion of Silicon Valley Bank (SVB) troubles.

Authorities have taken steps measures in the United States and Europe to protect the deposits of this Californian establishment, bankrupt and placed under public guardianship on Sunday.

• Listen to the economic chronicle with Sylvain Larocque, economics journalist at the Journal de Montréal and the Journal de Québec at the microphone of Richard Martineau on QUB radio:  

Withdrawal Guarantee < p>These announcements, however, did not prevent Wall Street from opening lower on Monday morning, and several regional banks collapsed. In early trading, the broader S&P 500 index lost 1.08%.

In Europe too, the star indices of the main markets suffered, with falls ranging from 2 to 3% or even more for the main indices, and banking stocks suffered sharp falls.

On Sunday, the authorities Americans announced that they were going to guarantee the withdrawal of all the deposits of the bankrupt Californian bank. The American authorities will also allow access to all the deposits of another establishment, Signature Bank, which was automatically closed by the American regulator.

In addition, the Federal Reserve – the Fed, the American central bank – has agreed to lend the necessary funds to other banks that may need them to honor withdrawal requests from their customers.

London announced that the UK branch of SVB had been sold to British banking giant HSBC, for a symbolic pound.

“SVB UK customers will be able to access their deposits and banking services normally from today”, assures the British Treasury.

Avoid contagion

The authorities want at all costs to avoid a panic in the markets on Monday and mass withdrawals of customers from banks, a “bank run” with potentially devastating effects.

The debacle of SVB illustrates the disruption of the whole US banking system in the face of Fed monetary tightening.

Interest rate hikes in the United States have encouraged customers to put their money in financial products that pay better than current accounts, drying up a crucial source for the cash-hungry new technology sector.

< p>This wave of bank withdrawals brought three banks to their knees last week: SVB, Signature Bank, but also Silvergate Bank, which is smaller, but known for its privileged links with the cryptocurrency community.

Parallel , the American authorities put SVB up for auction with the aim of finding a buyer as soon as possible.

The race against time 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 into bankruptcy, with dramatic consequences for the financial sector and the entire global economy.

In Germany, the banking supervisor Bafin assured lu ndi that the bankruptcy of SVB posed “no threat to the financial stability” of the country. French Economy Minister Bruno le Maire also declared that he “did not see any risk of contagion” for establishments in the country.