United States authorities are working on “material action” over the weekend in an effort to limit the ripple effect on the country’s banking system after the sudden collapse of Silicon Valley Bank on March 10.
According to a Reuters report that cited unnamed sources, officials in Joe Biden’s administration assessed the impact of the bank failure over the weekend with particular attention to venture capital firms and regional banks.
“It will be material action, not just words,” the source told Reuters.
During a speech on March 6, the chairman of the Federal Deposit Insurance Corporation (FDIC) Martin Gruenberg spoke about the risks associated with the increase in interest rates in the United States. “The current interest rate environment has a dramatic effect on the profitability and risk profile of banks’ funding and investment strategies,” he said before adding:
“These total unrealized losses, including securities available for sale or held to maturity, are estimated at $620 billion by the end of 2022. Unrealized losses on securities have significantly reduced the working capital of the banking industry.”
According to Gruenberg, the “good news” about the billions in unrealized losses is that “banks are generally in strong financial condition.”
“On the other hand, unrealized losses reduce the bank’s ability in the future to meet unexpected liquidity needs. That is because securities will generate less money when sold than anticipated, and because sales often lead to a reduction in regulatory capital”
Silicon Valley Bank (SVB) could affect regional banks across the United States, putting trillions of dollars at risk of opening banks, Cointelegraph previously reported. US Treasury Secretary Janet Yellen is working with regulators to address the collapse of Silicon Valley Banks and protect investors, but is not considering a major bailout.
According to Yellen, the regulator “is very aware of the problems that depositors are going to face, many of them are small businesses that employ people all over the country. And of course, this is an important problem, and we are working with the regulator to try to solve it. .”
A report from Bloomberg stated that the FDIC began auctioning the bank on March 11 night. According to reports, the offer is open for only a few hours, before the process closes this Sunday.