US, UK Regulators Consider Ways to Assist SVB Depositors and FDIC in Asset Auctioning – Reports

The FDIC began an auction process for the Silicon Valley bank late Saturday, with final bids due by Sunday afternoon. Bloomberg representativeOrt Sunday.

The FDIC is hoping for a quick agreement, but a winner may not be announced until late Sunday and there is a possibility that no agreement will be reached, sources told Bloomberg. FDIC officials did not immediately respond to requests for comment.

Silicon Valley Bank, the 16th largest lender in the US, collapsed under FDIC receivership on Friday after its customer base of tech startups became concerned and withdrew deposits. At the end of last year, SVB had more than $175 billion in deposits, most of which are uninsured, and also had $209 billion in total assets. trading in SVB SIVB shares,
-60.41%
were halted on Friday amid reports they were looking for a buyer.

See: Silicon Valley Bank branches have been shut down by regulators in the biggest bank collapse since Washington Mutual

The FDIC is now working to sell the assets and make a portion of customers’ uninsured deposits available as early as Monday, sources said. The agency has said it will make 100% of insured deposits available on Monday when Silicon Valley Bank branches reopen.

Meanwhile, talks are also reportedly ongoing between the Federal Reserve and the FDIC to potentially set up a fund to protect more depositors from other troubled banks, following the country’s first bank failure since late 2020. Bloomberg also reported.

The Fed and the FDIC, which is tasked with protecting depositors at insured US banks, have been talking to financial institutions about a way to quell the panic amid questions about how some Silicon Valley Bank customers will get their money back.

the FDIC, insured deposits up to $250,000 with eligible banks, has said all insured depositors will have full account access no later than Monday morning, but customers with more than $250,000 in their accounts have been provided with an FDIC hotline to call.

Uninsured depositors are expected to receive a receivership certificate and possible dividends once the bank’s assets are sold by the FDIC, but concerns center on the fact that more than 90% of the bank’s deposits are uninsured.

Read: Silicon Valley Bank failed for one simple reason: it lost confidence in its key startup customers.

Some analysts are now wondering whether similar problems could be lurking at other institutions. Many small and medium-sized lenders were questioned Saturday by FDIC officials seeking information about their financial health, Bloomberg reported, citing sources.

First Republic Bank FRC,
-14.84%
Sector stocks came under pressure last week, leading to a statement from the bank on Friday reassuring its “continued safety and stability and strong capital and liquidity positions”.

Read: UBS analyst argues First Republic is ‘not a SIVB’ as stock stabilizes

And: 20 banks sitting on potential security losses – like the SVB

One concern is that the alarm bells now ringing after the collapse of Silicon Valley Bank could result in wealthy customers siphoning their money from regional and midsize banks in favor of larger institutions like JPMorgan JPM.
+2.54%,
Some bank sources told the New York Post.

US Treasury Secretary Janet Yellen told CBS’ Face the Nation on Sunday that the government will not bail out the failed bank and officials are focused on how to help savers worried about their funds. Yellen said Friday the Treasury Department is watching some banks “very closely” after the Silicon Valley bank fallout.

Read: As Silicon Valley Bank’s concerns mount, Yellen says it has been “working with our banking regulators all weekend to draft appropriate guidelines” to target depositors

Meanwhile, the UK government said on Sunday it was working on a lifeline for companies that had frozen deposits in Silicon Valley Bank’s UK arm, the bank The Wall Street Journal reports.

In a statement, the UK Treasury said it wanted to “avoid or minimize damage to some of our most promising businesses,” adding the plan would ensure their short-term operating and cash flow needs are met.

Late Friday night, the Bank of England said it plans to put SVB’s UK subsidiary into bankruptcy proceedings on Sunday and that it will pay out depositors “as soon as possible”.

Under UK bankruptcy proceedings, deposits of up to £85,000 in individual accounts, equivalent to about $102,000, and up to £170,000 in joint accounts will be returned to customers, the Bank of England said. Other assets and liabilities of the bank are managed by bank liquidators and recoveries are distributed to creditors.

UK tech companies raised £24 billion last year, the third highest after the US and China, according to Dealroom figures. BeZero Carbon Ltd., a London-based startup offering a carbon offset credit scoring service, was one of them. The company’s chief executive, Tommy Ricketts, said it closed a $50 million round of funding in November, and about half of the money was in its account at Silicon Valley Bank as of last week.

The banks website states that it also has offices in Canada, China, India, Sweden, Denmark, Germany and Israel.

The banking crisis has investors nervous ahead of the US stock market open on Monday, with investors expected to keep a close eye as trading in Tokyo and across Asia gets underway later on Sunday.

Major US indices suffered losses of more than 4%, with the Dow Jones Industrial Average DJIA,
-1.07%
had its worst week since June on Friday, as fears of continued contagion in the banking sector added to ongoing worries about the economy.

Read: After the Silicon Valley bank collapse, what’s next for stocks as investors wait for key inflation readings?