US authorities have unveiled sweeping measures to ease fears over the health of the banking system following the failure of Silicon Valley Bank, as regulators took over a second troubled lender.
Regulators stepped in to ensure depositors still had access to their funds at SVB and promised other institutions help in meeting customers' needs after markets were rattled by the bank's sudden collapse.
In Britain, banking giant HSBC bought SVB's UK division for just £1 ($1.2) in a rescue deal overseen by the Bank of England and the government.
Amid fears over the wider sector, President Joe Biden vowed to hold "fully accountable" the people responsible for "this mess" and said he would deliver remarks on Monday on maintaining a resilient banking system.
"The American people and American businesses can have confidence that their bank deposits will be there when they need them," Biden said.
In a joint statement, financial agencies including the US Treasury said SVB depositors would have access to "all of their money" starting Monday and that American taxpayers will not have to foot the bill.
The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and Treasury added that depositors in Signature Bank, a New York-based regional-size lender with significant cryptocurrency exposure which was shuttered on Sunday after its stock price tanked, would also be "made whole."
The Fed also announced it would make extra funding available to banks to help them meet the needs of depositors, which would include withdrawals.
"We are taking decisive actions to protect the US economy by strengthening public confidence in our banking system," the statement said.
"The US banking system remains resilient and on a solid foundation," due in large part to reforms and banking industry safeguards undertaken after the financial crisis of 2008, they added.
"Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe."
- Avoiding 'contagion' -
The FDIC move guarantees deposits -- but only up to $250,000 per client and per bank.
Federal banking law, however, would allow the FDIC to protect uninsured deposits if a failure to do so would pose systemic risks, the Washington Post reported.
Regulators on Friday took control of SVB -- a key lender to startups across the United States since the 1980s -- after a huge run on deposits left the medium-sized bank unable to stay afloat on its own.
Hours before Sunday's joint statement, Treasury Secretary Janet Yellen said the government wants to avoid financial "contagion" from the SVB implosion, as it ruled out a bailout.
With the bank's future, and its billions in deposits up in the air, officials from the three agencies raced to craft a solution just hours before financial markets opened in Asia, and to avert a potential financial panic.
Yellen told CBS that the US government wanted "to make sure that the troubles that exist at one bank don't create contagion to others that are sound."
Investors punished the global banking sector on Thursday after SVB disclosed the extent of its troubles the day before, but by Friday, shares in some larger banks posted gains.
European stock markets, however, fell at the open Monday while most Asian indices also slid.
The British government's SVB UK rescue deal guarantees deposits of customers, which includes major businesses in the technology and life science sectors, and involves no UK taxpayer cash.
The BoE and the UK government stepped in after concluding that the "scale of the deterioration of liquidity and confidence means that... the position (of SVB UK) was not recoverable".
- No bailout -
SVB's implosion represents the largest bank failure since Washington Mutual in 2008.
Little known to the general public, SVB specialised in financing startups and had become the 16th largest US bank by assets: at the end of 2022, it had $209 billion in assets and approximately $175.4 billion in deposits.
Since Friday, there have been calls from the tech and finance sectors for a bailout.
Yellen said reforms made after the 2008 financial crisis meant the government was not considering this option for SVB.
"During the financial crisis, there were investors and owners of systemic large banks that were bailed out... and the reforms that have been put in place means that we're not going to do that again," she said.
In their joint statement on the latest bank woes and efforts to protect depositors of SBV and Signature, the agencies stressed shareholders and certain unsecured debtholders will not be protected.
Fed officials said "investors in those two banks will lose everything. Senior management of those two banks will bear losses and be removed."
The officials said the "core goal" of the moves was to reassure bank customers they would have their money to pay their bills or meet payrolls for their businesses.
European equities dive on fears of US banking crisis
European stocks tanked Monday as investors shrugged off global efforts to stem the fast-moving crisis emanating from the US banking sector.
Germany's finance watchdog insisted the collapse of Silicon Valley Bank (SVB) posed no threat to financial stability, and France's economy minister declared US bank failures had no contagion risk.
However, European equities tipped deep into the red as the morning progressed, with bank shares falling particularly hard in Italy and Switzerland.
Frankfurt and Paris stock markets dropped by about three percent, while Milan dived almost five percent at one stage and Zurich shed 1.7 percent.
London dipped 2.3 percent with losses capped after HSBC agreed to buy SVB's UK division for a nominal £1 ($1.2).
The dollar fell as the turmoil sparked uncertainty over the US Federal Reserve's plans to hike interest rates, while oil prices also slid.
- 'Weakest link' -
"Far from calming nerves, fear of contagion has ramped up further with investors dumping risk assets across Europe," City Index analyst Fiona Cincotta told AFP.
"Banks are leading the charge southwards with investors taking aim at Spanish and Italian banks, suggesting that these are considered the weakest links as fears rise."
Asian stocks diverged on US pledges to backstop troubled lenders after the collapse of SVB was followed by the failure of Signature Bank.
The crisis has sent shockwaves worldwide, with traders on red alert over any more bank failures.
"Markets... could continue to be volatile throughout the week as a major domino effect could cause widespread risk-off moods leading to further losses for stocks and riskier assets," said XTB analyst Walid Koudmani.
Banking authorities in both France and Germany said they saw no fears of contagion from the collapse.
Germany's finance watchdog said the collapse of the Silicon Valley Bank posed no financial threat in Germany, amid market jitters over contagion fears.
"The distressed situation of Silicon Valley Bank Germany Branch does not pose a threat to financial stability," Bafin said, because it "has no systemic relevance".
Bafin added it had ordered a "moratorium" on the bank's German branch, which it said did not offer bank deposit services in the country.
The total assets of the Frankfurt-based SVB branch amounted to just under 790 million euros ($843 million) at the end of 2022, Bafin added.
French finance and economy minister Bruno Le Maire said Monday SVB did not pose a danger to French financial institutions.
"I don't see any risk of contagion, so there's no special warning" to issue to local lenders, Le Maire told broadcaster Franceinfo.
The minister said that Paris' banks and financial system were "solid" with "a high liquidity ratio" to withstand shocks.
What's more, unlike Silicon Valley Bank -- which focused on cutting-edge technology firms -- French lenders "are not exposed to a single sector" but are "very diversified", Le Maire added.