The fallouts of two of the US’ largest banks, Signature Bank and Silicon Valley Bank (SVB), have sparked widespread concerns over the future of the banking system. However, US Treasury Secretary Janet Yellen has assured depositors that the government has pledged to protect deposits despite the recent scare.
What To Expect
Following the collapse of Silicon Valley Bank (SVB) and Signature Bank, US banking regulators reportedly rushed to convert all deposits to whole via a special fund. In addition, this includes deposits that are above the Federal Deposit Insurance Corporation (FDIC) insurance threshold.
Yellen stated that the American banking system remains robust and that users could feel confident that their deposits are ready whenever needed. As part of its emergency measures to cushion the impact of the bank crash, the Federal Reserve has temporarily lowered its borrowing requirements.
Thus, banks sourcing for short-term finances can utilize the discount window before the Fed reverses its decision. However, there are doubts over whether the government’s recent move will guarantee the safety of deposits, given the severity of the situation.
Accordingly, Republican lawmakers are skeptical about the government’s decision. Yellen acknowledged that this would not remain the same in the future.
According to the Treasury Secretary, the government only plans to cover uninsured deposits that it considers systemic risks to the US banking sector. Based on observation by industry experts, small tech firms, venture capitalists, and entrepreneurs made up a significant chunk of SVB’s clients.
Meanwhile, reports indicate that 94% of SVB’s assets are uninsured. Regardless, some lawmakers are opposed to the government’s bailout decision.
One of them, Senator Elizabeth Warren, took to Twitter to voice her displeasure.
US Banking Crisis And Effects On Crypto
According to sources familiar with the development, buyers of the now-collapsed Signature Bank may be required to divest part of their funds into crypto verticals. Large corporations in the United States are willing to be part of the rescue efforts to prevent another bank from biting the dust.
Meanwhile, regulators and policymakers are evaluating the impact of social media and other messaging platforms as contributing factors to the crash of these banks. Additionally, they seek to determine whether psychological banking has impacted the traditional banking sector in the digital age.
Furthermore, authorities have identified the rise of Web3 technology and the increasing market capitalization of crypto assets as contributing factors to these crashes. The case has been argued extensively, given Silvergate Bank’s exposure to crypto trading platforms.
However, industry experts opine that the government would have to do more to ensure stability in the banking space.