O Federal Reserve called an extraordinary meeting for tomorrow at 11:30 am. According to the statement, the US central bank “will review and determine the advance and discount rates to be charged by district units of the Fed.”
The emergency meeting may have been motivated by the collapse of the Silicon Valley Bank (SVB), last Friday (10). On Wednesday, the bank reported the liquidation of US$ 21 billion in bonds with US$ 1.8 billion in loss in the 1st quarter of the year.
In addition, the institution planned to sell US$ 1.7 billion in shares and this sent customers rushing to withdraw the money. The bank lost nearly $10 billion overnight.
SVB, which financed credit for startups, was the 16th largest bank in the United States and had around $209 billion in assets by the end of 2022.
It is worth noting that SVB is the largest financial institution to fail in the US since the collapse of the financial system in 2008, following the collapse of investment bank Lehman Brothers.
According to information from Bloomberg, the bank collapse is already being felt by companies in the UK, Canada and India. In the United Kingdom, for example, the local SVB unit must declare that it will not be able to honor its commitments to creditors. Technology companies already expect a shock in the sector from Monday (12) due to the cascading effect of the crash.
SVB with no redemption plans
US Treasury Secretary Janet Yellen said on Sunday (12) that the government does not plan to rescue the SVB, but tried to reassure the market by saying that the situation is very different from the 2008 financial crisis.
“We won’t do it again, but we are concerned about depositors and focused on trying to meet their needs,” he said in an interview with CBS.
The Federal Deposit Insurance Corporation (Fdic), a kind of American FGC, guarantees deposits of up to US$ 250,000. However, startups had higher values than those applied. So the Fed and the Fdic are considering creating a fund that would allow regulators to guarantee deposits at troubled banks after the SVB crash.
With this, the institutions hope to reassure creditors and contain the panic in the market.
Source: Moneytimes
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