US president Joe Biden is expected to unveil further measures to prop up the US banking system today after two tech-focused banks were shut down over the weekend due to fears about the safety of depositors’ money.
Silicon Valley Bank (SVB) was rescued by the Federal Deposit Insurance Corporation (FDIC) on Friday, with a new bank set up to hold and guarantee deposits up to US$250,000 held at the bank.
Even so, there is still uncertainty over what happens to larger deposits with some reports suggesting that half of any money held above the threshold might be lost.
The FDIC took action after SVB was hit by depositors rushing to remove US$42bn on Friday following a botched fundraising and bond sale.
SVB is said to have deposits/assets of anywhere between US$120bn and US$200bn.
On Sunday, crypto bank Signature was also closed down due to what was said by the regulator to be a risk of systemic bank failure.
All Signature's depositors will be "made whole", said the FDIC.
"As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” added the FDIC.
Signature was a major lender in the crypto space with total assets of about US$110bn and deposits of over US$88bn.
Two big customers were the crypto exchange Coinbase and stablecoin issuer Paxos, which in statements said they held cash of US$240mln and US$250mln respectively at the bank.
Over the weekend, President Biden said the “American people and American businesses can have confidence that their bank deposits will be there when they need them”.
Treasury Secretary Janet Yellen, meanwhile, commented that there would be no bail-out of SVB and that this was not a repeat of 2008 when Lehman Bros’ collapse threatened the world’s banking system.
"The American banking system is really safe and well-capitalised, it’s resilient,” she told CBS (NYSE:CBS).