Biden offers assurances after major US banks collapse
US President Joe Biden has sought to dispel fears over a potential financial crisis following the rapid collapse of two major United States banks, saying customers would be protected and can trust that the country’s banking system is “safe”.
During a brief news conference at the White House on Monday, Biden said he would seek to hold those responsible to account and push for better oversight and regulation of larger banks, while he also promised that “no losses would be borne by the taxpayers”.
US regulators closed the Silicon Valley Bank (SVB) on Friday after it experienced a traditional bank run, where depositors rushed to withdraw their funds all at once – the second largest bank failure in the country’s history behind only the 2008 failure of Washington Mutual.
But the financial bloodletting was swift as New York-based Signature Bank also failed.
On Monday morning, Biden told reporters that “all customers who had deposits in these banks can rest assured – rest assured – they’ll be protected and they’ll have access to their money as of today”. This includes small businesses across the US, he said.
“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” Biden said.
The US president’s address came after weekend moves by Washington to guarantee deposits at collapsed tech-focused lender SVB failed to reassure investors about the health of other banks around the world.
With more than $110bn in assets, Signature Bank is the third-largest bank to fail in US history. Another beleaguered bank, First Republic Bank, announced on Sunday that it had bolstered its financial health by gaining access to funding from the US Federal Reserve and JPMorgan Chase.
In an effort to shore up confidence, the Fed, US Department of the Treasury and Federal Deposit Insurance Corporation (FDIC) said on Sunday that all SVB clients would be protected and have access to their money.
Biden’s economic team worked with regulators over the weekend on the measures, which included guaranteeing deposits in both banks, setting up a new facility to give banks access to emergency funds and making it easier for banks to borrow from the Fed in emergencies.
“This step will ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.
Still, despite the measures taken by the Biden administration, Europe’s STOXX banking index fell 5.8 percent on Monday and was on track for its biggest two-day fall since March 2022, soon after Russia invaded Ukraine.
Germany’s Commerzbank fell as much as 12.7 percent, while Credit Suisse hit a new record low after falling more than 15 percent.
“The market started down a bit lower as investors were trying to assess what possible damage might come as a result of these latest bank failures and the president’s moves to try to stabilise the markets,” Al Jazeera’s Kristen Saloomey reported from New York.
“The good news is that the markets seem to be rebounding after opening at a lower rate,” she said.