SVB bankruptcy: the US government wants to avoid contagion, but rules out a bailout

The US government wants to prevent the bankruptcy of US bank Silicon Valley Bank (SVB) from causing contagion to the rest of the banking system, US Treasury Secretary Janet Yellen said on Sunday, who nevertheless ruled out a bailout of the establishment. .

“We want to make sure that the problems that affect one bank do not create contagion to others that are solid,” said the American Minister of Finance during an interview with CBS.

The Deposit Guarantee Agency (FDIC), an offshoot of the US government, took control of Silicon Valley Bank on Friday, on the verge of implosion under the effect of massive withdrawals from its customers.

If the big banks have so far been spared, several medium-sized or regional establishments unscrewed on the stock market on Friday, fled by worried investors. This is particularly the case of the Californian First Republic, which dropped nearly 30% in two sessions, Thursday and Friday, or Signature Bank, cut by a third of its value since Wednesday evening.

Both institutions have a large proportion of companies in their client portfolio, whose deposits often exceed the maximum amount insured by the FDIC, or $250,000 per depositor, which could lead them to withdraw their funds.

Janet Yellen explained on Sunday that the government was working this weekend, with the FDIC, to “resolve” the situation of SVB, of which approximately 96% of the deposits are not covered by the refund guarantee of the FDIC.

“I am sure (the FDIC) is considering a wide range of solutions, which includes an acquisition” by another bank, said the Treasury Secretary. On the other hand, it ruled out a rescue of SVB via an injection of public money. “During the financial crisis (of 2008), investors in large systemic banks”, whose fall the authorities believe would pose a risk to the entire financial system, “were rescued” by the American government, a-t- she called back. “We’re not going to do it again.”