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Regulators in the US and UK consider ways to help SVB depositors, FDIC reports on asset auction

The U.S. Federal Deposit Insurance Corporation is reportedly holding an auction this weekend for the assets of the bankrupt Silicon Valley Bank of California, while talks are also reportedly underway with the Federal Reserve to potentially create a fund to protect depositors.

Meanwhile, the British government said on Sunday it was working on a lifeline for companies that had locked up deposits at Silicon Valley Bank’s UK branch.

The FDIC began an auction process for Silicon Valley Bank late Saturday, with final bids set for Sunday afternoon, Bloomberg reported Sunday.

The FDIC is hoping for a quick deal, but a winner may not be known until late Sunday and a deal may not be reached, sources told Bloomberg. FDIC representatives did not immediately respond to requests for comment.

Silicon Valley Bank, the 16th-largest lender in the US, collapsed into FDIC receivership on Friday after its customer base of technology start-ups 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. Trade in shares SVB SIVB,
was shut down Friday amid reports it is looking for a buyer.

To see: Silicon Valley Bank branches closed by regulator after biggest bank failure since Washington Mutual

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

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Meanwhile, talks are also reportedly underway between the Federal Reserve and the FDIC to possibly create 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 charged with protecting depositors of insured U.S. banks, have been talking to financial institutions about a way to quell panic as questions linger about how some Silicon Valley Bank clients spend their money. will get back.

The FDIC, which insures deposits of up to $250,000 with eligible banks, has said all insured depositors will have full account access by Monday morning, but customers with more than $250,000 in their accounts have been given an FDIC hotline to call .

Uninsured depositors are expected to receive a certificate of trusteeship and possibly dividends once the bank’s assets are sold by the FDIC, but the concern is that more than 90% of the bank’s deposits are uninsured.

Read: Silicon Valley Bank failed for one simple reason: key startup clients lost confidence.

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

First Republic Bank FRC,
stocks were among the stocks in the sector that came under pressure last week, resulting in a statement Friday from the bank assuring its “ongoing safety and stability and strong capital and liquidity positions.”

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Read: UBS analyst says First Republic is “not a SIVB” as stocks stabilize

And: 20 banks that are faced with huge potential securities losses – just like SVB

One fear is that the alarm bells now ringing in the wake of the Silicon Valley Bank collapse could lead wealthy clients to divert their money from regional and medium-sized banks in favor of larger institutions such as JPMorgan JPM,
some banking sources told The New York Post.

U.S. Treasury Secretary Janet Yellen said on CBS’ “Face the Nation” on Sunday that the government will not bail out the bankrupt bank, with officials focusing on helping depositors worried about their money. Yellen said Friday that the Treasury was watching some banks “very carefully” in the wake of the Silicon Valley Bank fallout.

Read: As concerns about Silicon Valley Bank grow, Yellen says she “worked all weekend with our banking regulators to design appropriate policies” to appeal to depositors

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

In a statement, the UK Treasury said it wanted to “prevent or minimize harm to some of our most promising businesses”, adding that the plan would ensure their short-term operational and cash flow needs were covered.

Late Friday evening, the Bank of England said it planned to place SVB’s UK subsidiary into insolvency proceedings on Sunday and will pay out depositors “as soon as possible”.

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Under the UK’s insolvency 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 will be administered by bank liquidators and recoveries will be distributed to creditors.

UK tech companies raised £24bn last year, the third highest after the US and China, according to figures from Dealroom. BeZero Carbon Ltd., a London-based start-up that provides a credit rating service for carbon offsets, was one of them. The company’s CEO Tommy Ricketts said it closed a $50 million funding round in November and about half of the money was in the Silicon Valley Bank account last week.

The bank’s website states that it also has branches in Canada, China, India, Sweden, Denmark, Germany and Israel.

The banking crisis has put investors on edge ahead of the opening of the US stock market on Monday, and investors are expected to watch closely as trading begins in Tokyo and across Asia later on Sunday.

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

Read: What’s next for stocks after the collapse of the Silicon Valley Bank as investors await crucial inflation readings

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