(UnitedVoice.com) – Silicon Valley Bank (SVB) became the second-largest bank in US history to collapse on Friday, March 10. It was the largest collapse since Washington Mutual Bank was put into receivership by federal regulators in 2008, during the financial crisis.
Days after SVB failed, the federal government took over Signature Bank — which became the third-largest bank collapse in history. The news of the two banks failing threw the markets into a panic that spread across the Atlantic Ocean.
Financial Institution Saves Bank
When SVB collapsed in the US on Friday, HSBC UK executives jumped into action. The financial institution purchased SVB UK for a symbolic £1. The deal came after a week of negotiations between the banking industry and the UK government as authorities desperately tried to prevent a larger financial crisis from unfolding.
The Guardian reported banking regulators, lawmakers, and banking executives all worked together in the wake of SVB’s collapse to prevent a larger crash in the UK. One person told the news organization, “It was frantic.” Not because they didn’t believe they could solve the larger problem but because they only had until 7 a.m. on Monday, March 13, to do it to prevent a stock market collapse.
According to Tech Crunch, the collapse of SVB left the UK tech industry highly exposed. The bank was one of the largest for tech startups. HSBC released a statement saying the purchase was immediate. The bank explained, “SVB UK had loans of around £5.5 billion and deposits of around £6.7 billion.” In 2022, it had a profit before tax of £88 million, and its equity was about £1.4 billion. HSBC promised to release a final report of the gain when it has had time to complete it.
UK Chancellor Jeremy Hunt tweeted about the deal and reassured the public that their money is safe.
This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC
Deposits will be protected, with no taxpayer support
I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise
— Jeremy Hunt (@Jeremy_Hunt) March 13, 2023
Across the Pond
In America, financial regulators and the federal government were also trying to prevent a larger crisis from unfolding. After SVB failed, Signature Bank customers panicked and began pulling their money out of the bank. That led to a bank run which quickly caused the bank to fail.
A board member of Signature Bank told CNBC customers were so freaked out they pulled $10 billion in deposits. The federal government then swooped in and took over operations, essentially bailing the bank out in an attempt to stop more widespread panic from taking hold.
As the banking industry picks up the pieces, Americans should know their money is safe. As long as people have their cash in FDIC-secured banks, up to $250,000 per bank is secure. What does that mean? If you have an account at Wells Fargo that is worth $250,000 or less, it is insured by the federal government. If your spouse also has an account worth $250,000, then that is also insured. If you each have another account at Bank of America worth $250,000 each, then that money is insured — and so on.
In other words, don’t panic.
Copyright 2023, UnitedVoice.com