The banking and financial sector in the USA is currently in a state of fear and uncertainty. The chain of unfortunate events started with the voluntary bankruptcy filing of Silvergate.
This incident was shortly followed by Silicon Valley Bank, which was sealed by the regulators in California concerning issues regarding liquidity. The latest banking enterprise to bite the dust is Signature bank.
The signature bank has been sealed by New York State Charter Authority. Reflecting on the matter, Federal Reserve has assured the depositors and stakeholders that all the funds will be reimbursed for both Signature and SVB.
The statement about bail-out was issued by the Federal Reserve chair in tandem with Treasury Secretary and Federal Deposit Insurance Corporation. The emergency response of the US government to contain the banking sector’s demise has been administered by President Biden.
US Citizens and Taxpayers will not Suffer from Any Losses
POTUS has issued a new press release that reveals that the government is taking measures to prevent any financial damage to taxpayers. However, the fall of various banking enterprises has installed an air of worry and fear among the users, and there is an increasing fear of bank runs. Meanwhile, the government of the US is taking all preventive measures to avoid furthering any damages.
The US government has assured the citizens that the state has adopted several preventive measures since the 2008 financial crisis. The fall of Signature bank marks the third bank in a row that has gone out of commission during the last seven days.
Meanwhile, Silvergate bank executives have stated that they are also planning to halt the operations of Silvergate Exchange Network or SEN. SEN was responsible for supporting 24/7 payment facilities for various cryptocurrency enterprises.
Signature Bank was enabling time-free payment solutions to various digital payment networks in real time. Both Silvergate and Signature was popular banking solution provider among crypto entities.
The reported accumulated loss of Signature is reported to be around $110 billion, while the aggregate loss for Silvergate was only $11 billion in assets as of 2022. The government relief package will cover the losses of depositors relating to the Signature bank.
The shareholders and unsecured debt holders would not be able to make up for their losses. However, government agencies have sparked into action to prevent the further spread of the ongoing banking demise.
The US government has also set up a relief fund called Bank Term Funding Program that will issue 1 year loans to banking enterprises that are suffering from liquidity issues. Any banks that are eligible for this assistance may also use their treasure reserves and other assets as collateral to qualify for the BTFP loan.