U.S. authorities launched emergency measures to shore up confidence in the banking system after the failure of Silicon Valley Bank threatened to trigger a broader financial crisis
The Biden administration's intervention underscores how a relentless campaign by the Fed and other major central banks to beat back inflation is putting stress in the financial system and global markets.
"What investors have to expect coming into tomorrow and beyond is that we are going to be dealing with a lot of event risk," said Michael Purves, chief executive of Tallbacken Capital Advisors. "There are still going to be lingering questions with other regional banks."The collapse of SVB - the largest bank failure since 2008 - sparked concerns over whether small-business clients would be able to pay their staff, with the FDIC only protecting deposits of up to $250,000.
A senior U.S. Treasury official said the actions taken would protect depositors, while providing additional support to the broader banking system, but officials and regulators were continuing to monitor financial system stability. Signature, like SVB, had a clientele concentrated in the tech sector, and the securities on its balance sheet had eroded as interest rates rose. As of September, almost a quarter of Signature’s deposits came from the cryptocurrency sector, but the bank announced in December that it would shrink its crypto-related deposits by $8 billion.
Fed fund futures surged on Monday to imply only a 17% chance of a half-point rate hike by the Federal Reserve when it meets next week, well off the 70% before the SVB news broke last week., which would offer loans of up to one year to depository institutions, backed by Treasuries and other assets these institutions hold.
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