Fed says it will review supervision of Silicon Valley Bank
New York (AP): The Federal Reserve will review its supervision of Silicon Valley Bank after it collapsed in the second-largest US bank failure on record, the Fed announced Monday.
Michael Barr, the Fed's vice chair for supervision, will lead the effort, the Fed said in a brief statement.
Chair Jerome Powell said the central bank would conduct a "thorough, transparent, and swift review."
In a statement, Barr said: "We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience."
Depositors withdrew savings and investors broadly sold off bank shares Monday as the federal government raced to reassure Americans that the banking system was secure after two bank failures fed fears that more financial institutions could fall.
President Joe Biden insisted that the system was safe after the second- and third-largest bank failures in the nation's history happened in the span of 48 hours. In response to the crisis, regulators guaranteed all deposits at the two banks and created a program that effectively thew a lifeline to other banks to shield them from a run on deposits.
"Your deposits will be there when you need them," Biden told the public, seeking to project calm. He also said the banking executives responsible for the failures would be held accountable.
Regulators closed the Silicon Valley Bank on Friday after depositors rushed to withdraw their funds all at once. The only larger failure in U.S. banking history was the 2008 collapse of Washington Mutual. New York-based Signature Bank also collapsed in the third-largest failure in the U.S.
In both cases, the government agreed to cover deposits, even those that exceeded the federally insured limit of USD 250,000.
Despite the message from the White House, investors broadly dumped shares in bank stocks. Shares of First Republic Bank plunged more than 70 per cent even after the bank said it was taking emergency funding from the Federal Reserve and additional money from JPMorgan Chase.
First Republic wasn't alone. Shares of well-known franchises like Charles Schwab, Fifth Third Bank, Truist, Comercia and Ally Financial all fell sharply.
The selloff happened in part because the country woke up to a new banking system and investors had to find the winners and losers, banking experts said.
There was no guarantee that the anxiety would not spread. Customers at other banks with deposits over the USD 250,000 limit remained at risk of losing access to their money for a time.
Just because the government covered for Silicon Valley Bank and Signature Bank "doesn't mean they are going to cover for these smaller banks," said Chris Caulfield, a senior partner at West Monroe.
But the government's actions suggested it would stand behind all deposits if doing so prevents damage to the broader economy.
"Everything is now covered. That's a fact. No matter how specialized or isolated your bank is, if there's a risk of contagion, regulators have made it clear that they are going to intervene," said Norbert Michel, a banking policy expert at the libertarian-leaning Cato Institute.
Ian Brandt, who had an account at Signature Bank, visited a branch in New York City down the street from the law firm where he is attorney. After being unable to reach someone by phone, he walked to the bank to see if it was open.
Asked if he felt any assurance after the bank's deposits were secured by the government, Brandt said, "For the moment."
Amid the selloff of midsize banks, investors kept relatively calm over the health of the nation's biggest banking bulwarks, such as JPMorgan Chase, Citigroup, Bank of America and Wells Fargo. Investors apparently concluded that the only place to be safe in banking was with the nation's most strictly regulated institutions.
Regional banks were seen as the riskiest, since they do not have the scale to compete against larger competitors. Large account balances once seen as a positive sign that a bank's clients are well off were a liability since they could be withdrawn at the first sign of trouble.
"I wouldn't want to be running a regional bank right now where my services are no different from my competition," Caulfield said.
International regulators also had to step in to ease fears. The Bank of England and U.K. Treasury said they facilitated the sale of a Silicon Valley Bank subsidiary in London to HSBC, Europe's biggest bank. The deal protected 6.7 billion pounds (USD 8.1 billion) of deposits.
Under the plan announced by U.S. regulators, depositors at Silicon Valley Bank and Signature Bank were able to access their money. A new Fed program will allow banks to post those securities as collateral and borrow from the emergency facility.
The Treasury has set aside USD 25 billion to offset any losses. However, Fed officials said they do not expect to have to use that money, given that the securities posted as collateral have a very low risk of default.
New York bank regulators took possession of Signature Bank on Sunday, ousting its leaders and handing day-to-day control over to the Federal Deposit Insurance Corp.
New York Gov. Kathy Hochul said the decision by the state Department of Financial Services was aimed at holding off a bigger crisis involving more banks.
"Our view was to make sure that the entire banking community here in New York was stable, that we can project calm," Hochul said Monday at a news conference.
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Lets win the world through love, friendship: Dr. Boby Chemmanur
Mangaluru: “Wars, bombings, mass killings etc. are happening all over the world for different reasons. However, none of us will be aware of what we have achieved from this. If everyone wants to live in peace, we all have to extend the hand of friendship. So let's win the world with friendship and love,” said businessman, social worker, donor Dr. Boby Chemmanur speaking after receiving honor from the Team B-Human in a program held at Kianza Garden near Someshwara Uchila on Saturday.
Boby revealed about not visiting Mangaluru despite invitations owing to the city's bad impression he had. “However, after watching Team-B Human's social service video, my perspective about Mangaloreans changed.” In addition he also promised to help the people of this region, including my fans through a charitable trust.
Expressing gratitude, he said, “Once upon a time I used to be a man who would flaunt my wealth. After my mind transformation, I learned to love and befriend the world. I myself paid one crore rupees for the release of Abdul Rahim, a young man from Kerala who was stuck in Saudi Arabia. My Mother, who would not give money to non-christians, gave Rs. 1 Lakh and encouraged the funding. Many people have helped me to achieve my goal. I am grateful to all of them.”
Inaugurating the program, Manjeshwar MLA A.K.M. Ashraf called Kerala a model for humanity in the country. “Even though Kerala has been portrayed in a distorted way by some individuals, the real story of Kerala is known as Boche created by Dr. Boby Chemmannur. It is commendable that Team B Human has honored such social workers.” Legislative Assembly Speaker UT Khader who joined the program virtually extended his best wishes.
The program, led by Asif Deals, Founder President of Team B-Human, also felicitated Sabita Shetty, Founder Managing Trustee of Tapasya Foundation, and Hanif Puttur, General Secretary of CRDF, Puttur.
Zakaria Jokatte- Managing Director of Al Muzain Group, Sharif Bolara- Managing Director of Whitestone, Mansoor Ahmad Azad- Chairman of Hidaya Foundation, Muhammad Kunhi-Managing Director of Shanti Prakashan, Abdul Latif Gurpur- Managing Director ANI Trading Company, Muzafar Ahmed-Trustee of Team-B Human, Abdullah Monu- Administrative Director Eurogroup Qatar , KA Bawa of Deals Group, Khayyum Manya- Trustee of Abhayam Dialysis Center Kasaragod, DK District Wakf Advisory Committee Vice Chairman-AK Jamal, Sameer Kasaragod, Naveen Hegde were present during the occasion.
Siraj, President of the Mangalore unit of Team B Human, extended a warm welcome, while motivational coach Rafeeq Master and Saif Sultan, founder of Hope Foundation, moderated the program.
