The US government is coming to the aid of customers of Silicon Valley Bank, guaranteeing their funds deposited with the bank. With this, the US government is trying to limit the potential damage from the failure of the bank, which is very important to the tech sector.
Last Friday, the US Treasury, in cooperation with the US central bank Federal Reserve and the Federal Deposit Insurance Corp, guaranteed the amounts deposited by customers at the collapsed Sillicon Valley Bank. Starting today, customers will regain access to these amounts.
The so-called “bailout” or deposit guarantee also guarantees customers of the failed bank access to amounts deposited above the normal limit of $250,000. The absolute majority of the bank’s customers had amounts deposited there above this limit, including many startups and other tech companies.
System crash prevented
According to the US government, it was determined not to intervene in the bankruptcy, but has now done so anyway. The possible reason for this intervention is that the U.S. government may not expect it to stay with Silicon Valley Bank. The failure of this bank could possibly result in a domino effect, with even more banks collapsing.
In their statement, the relevant US authorities state that they also guarantee that other banks can meet their obligations to their customers. In addition, they also clearly state that any losses will not be at the expense of taxpayers. The cost of the bailout will be recovered from the banks, as stipulated by US law.
Bank run on Silicon Valley Bank
American Silicon Valley Bank played a major role in the U.S. tech startup ecosystem. Last week, the bank faced a bank run. This followed the announcement that the bank wanted to raise 2.25 billion in capital to shore up its finances. This was followed by several calls to withdraw money from the bank.
During the bank run, customers tried to withdraw $42 billion on Thursday, March 9. This the bank could not muster. On Friday, March 10, the bank was closed and Federal Deposit Insurance took over.