California banking regulators on Friday closed SVB, appointing the Federal Deposit Insurance Corporation (FDIC) as receiver to protect depositors at the startup-focused lender. The collapse of the startup-focused bank has raised concerns about runs on regional banks, and the ability of small businesses that banked with SVB to pay their employees.
Yellen met on Friday with officials from the FDIC and the Office of the Comptroller of the Currency to address the bank's collapse, and she and White House officials expressed confidence in the ability of banking regulators to respond. On Sunday, she sought to reassure Americans that the U.S. banking system was safe, better capitalized and more resilient than during the 2008 global financial crisis, given new controls and capital requirements put in place after 2008 and tests during the early days of the COVID-19 pandemic. "Americans can have confidence in the safety and soundness of our bank system," Yellen said, adding that regulators wanted to ensure that the crisis did not spread to other banks. "We want to make sure that the troubles that exist at one bank don't create contagion to others that are sound," she said. Asked if the U.S. government would consider the acquisition of SVB by a foreign bank, Yellen said: "So this is really a decision for the FDIC, as it decides on what the best course is to resolve this firm. And I'm sure they're considering a wide range of available options. That would include acquisitions.
The FDIC stepped in Friday to protect the deposits of up
to $250,000, but deposits over that amount - which accounted for
85% of SVB accounts - are at risk.
Asked if depositors should be paid back in full, Yellen
declined to comment on the details. "We're very aware of the
problems that depositors will have. Many of them are small
businesses, that employ people across the country. Of course
this is a significant concern."
More than 3,500 CEOs and founders representing some 220,000
workers have signed a petition appealing directly to Yellen and
others to backstop depositors and warning that more than 100,000
jobs could be at risk.
Venture investors have advised startups to seek alternatives
to gain short-term liquidity.
(Reporting by Sarah N. Lynch, Rami Ayyub and Andrea Shalal;
Editing by Hugh Lawson, Frank Jack Daniel and Deepa Babington)
