Here’s How SVB’s Collapse Is Reverberating Around the World
Silicon Valley Bank became the biggest US lender to fail in more than a decade, creating fears of contagion in tech and finance sectors in the US and around the world.
US regulators took extraordinary measures to shore up confidence in the financial system, part of a frantic weekend that saw the surprise closure of New York’s Signature Bank along with mounting concerns about spillover effects to other regional lenders and the wider economy.
On Monday, the UK moved quickly to stem fallout by selling SVB’s British unit to HSBC Holdings Plc for £1. Elsewhere companies were tallying up their exposure, with most reassuring investors that the risk was manageable.
But the positive effect from the overnight support by US regulators quickly evaporated, with stocks signaling that fallout from the incident is far from over. The selloff extended to emerging-market assets. Stocks from the Middle East to Africa and Latin America tumbled toward their lowest levels this year.
Here’s a roundup of how companies, investors and governments are responding:
Treasury Department, Federal Reserve and FDIC: In an effort to avert a broader crisis, US authorities introduced a new backstop for banks that Federal Reserve officials said was big enough to protect the entire nation’s deposits. The FDIC said it will resolve SVB in a way that that “fully protects all depositors.” The Fed also announced a new “Bank Term Funding Program” that offers one-year loans to banks under easier terms than it typically provides. $25 billion is available.
First Republic Bank: The California-based lender fell a record 78% after it moved to try and quell concern about its liquidity. The declines came after the bank said in a statement late Sunday that it had more than $70 billion in unused liquidity to fund operations from agreements that included the Federal Reserve and JPMorgan Chase & Co.