Fully reimbursing SVB depositors may prove to be a bad move (via CNN)
Reimbursing all SVB and Signature Bank depositors — even if their deposits are worth millions of dollars will have long-term impacts.
On Sunday, the US Treasury, Federal Reserve and Federal Deposit Insurance Corporation (FDIC) jointly announced a package of actions to stop the turmoil from Silicon Valley Bank’s insolvency and Signature Bank’s near collapse. As details gradually emerge about the process that led to that decision, it appears likely that a primary motivation was to rescue Silicon Valley from what might have been a severe downturn.
On the face of it, these actions have been successful in the short term. The sense of panic has largely receded, there is no indication of an accelerating deposit run and market prices rebounded (though they’re down again due to shares of Credit Suisse crashing over ostensibly unrelated news). Startups that feared they wouldn’t meet this week’s payroll deadline have been reassured. Order is being gradually restored... (Click the link above to read more).
Related content
The US and Swiss messes may nudge the EU towards better international bank capital standards compliance
Bank collapses show the importance of strong capital and liquidity positions and should signal to the EU the benefits of closer adherence to Basel III
Will China’s new financial regulatory reform be enough to meet the challenges?
This paper aims to inform the discussion in relation to China with accounts of experiences in large and complex financial sectors.
Central banks: uncertainty is the problem, not managing the trilemma
Regaining price stability is difficult but doable; the bigger problem facing central banks is economic uncertainty.
The European Commission’s legislative proposal on Crisis Management and Deposit Insurance
At this invitation-only event Marie Donnay will discuss proposed legislation on CMDI in the context of recent banking turmoil.