(San Francisco) A coalition of midsize US banks has asked federal regulators to guarantee all customer deposits for two years, even above the usual limit of $250,000, to avoid a contagion phenomenon after the bankruptcy of SVB bank, according to Bloomberg.
This measure “would immediately halt the exodus of customers from smaller banks, stabilize the banking sector and greatly reduce the risk of further bankruptcies”, argued the Mid-Size Bank Coalition of America in a letter addressed to the authorities, according to an article released on Saturday by the news agency.
The recent failures of Silicon Valley Bank and Signature Bank are causing a crisis of confidence in the sector.
Many customers of similar banks withdrew their money and deposited it in larger banks, such as JPMorgan Chase or Bank of America, considered too big for the state not to bail them out in a crisis.
Currently, in the United States, deposits are protected by the banking regulator, the FDIC, up to $250,000.
This week, the First Republic bank, which mainly serves wealthy clients, saw its stock market valuation drop by 80%. Based in San Francisco, it is the 14e US bank by asset size.
“Regardless of the general health of the banking industry, confidence has been eroded for all but the largest banks,” the coalition said, according to Bloomberg.
In particular, it calls on the FDIC, the Federal Reserve (Fed) and the Secretary of the Economy Janet Yellen to “restore confidence”.
The group of banks proposes to finance this measure themselves by increasing the amount of the contributions that they already pay to the FDIC to guarantee the deposits.
On Thursday, eleven major US banks pledged to deposit a total of $30 billion in First Republic accounts.
Bank of America, Citigroup, JPMorgan Chase and eight other institutions hope to show their “confidence in the banking system” of the country, according to a joint press release.
The coalition and the authorities could not be reached immediately.