(New York) The boss of Silicon Valley Bridge Bank, the entity created by US regulators to succeed Silicon Valley Bank (SVB) after its bankruptcy, on Tuesday called on customers to bring their deposits back into the organization at the time where the big American banks see customers flocking.
SVB, which became insolvent after massive customer withdrawals, was placed under the control of the authorities on Friday, who entrusted its management to the American agency responsible for guaranteeing deposits (FDIC).
“We are doing everything in our power to rebuild, regain your trust and continue to support the innovation economy,” wrote in a message Tim Mayopoulos, appointed Monday to head the new establishment by the FDIC.
The bank is in the process of restarting its various systems, “granting new loans and honoring existing credit solutions”, he said.
“The first thing you can do to support the future of this institution is to help us rebuild our deposit base, both by leaving deposits with Silicon Valley Bridge Bank and by transferring deposits that have gone to the last few days,” he pleaded.
SVB’s failure on Friday, the biggest bank failure in the United States since 2008, was preceded on Wednesday by the liquidation of Silvergate Bank, a small regional bank that has become the favorite destination of the cryptocurrency community, and was followed by the forced closure of Signature Bank on Sunday, 21e country bank.
Movements to major banks
The situation benefits the biggest banks like JPMorgan Chase and Bank of America, which have seen an influx of customers and deposits in recent days, according to two sources familiar with the sector.
These establishments are not actively seeking new customers from competitors given the context, said the two sources.
But they welcome customers from closed banks, which represents high amounts, said one of them.
Clients from small and medium banks have also probably transferred all or part of their funds “to major players that the government cannot, in their eyes, let fail”, says Alexander Yokum, who analyzes regional banks for the firm. CFRA.
Departures should, however, depend on the banks, the composition of their clientele or their regional presence, he believes.
The extent of the movements will probably only be known when the banks publish their quarterly results in April, or if they publish an interim report by then, underlines Alexander Yokum.
In a note, ratings agency S&P Global Ratings said it “did not see evidence that uncontrollable deposit outflows recorded at a few banks have spread widely” to others.
“We believe that the emergency measures announced by the Federal Reserve (Sunday) have provided banks with additional sources of liquidity when needed and have likely also reduced the likelihood that the issue of confidence will become an issue for a large number of banks”, it is added.
On Thursday alone, SVB had received some $42 billion in withdrawal orders from clients alarmed by the bank’s desire to quickly replenish its liquidity, by raising capital and selling financial securities with a loss of 1.8 billion dollars at the end.
The FDIC guaranteed that all customers of the bank before it filed for bankruptcy would have access to all of their funds, including beyond the usual $250,000 limit.