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Governments in the U.S. and Britain are taking extraordinary steps to prevent a potential banking crisis after the failure of California-based Silicon Valley Bank prompted fears of a broader upheaval.
Regulators in the U.S. rushed to close Silicon Valley Bank on Friday when it experienced a traditional bank run, where depositors rushed to withdraw their funds all at once. It is the second-largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual. In an effort to shore up confidence in the banking system, the Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients would be protected and able to access their money.
While the bank is small, with less than 0.2% of U.K. bank deposits according to central bank statistics, it had a large role in financing technology and biotech startups that the British government is counting on to fuel economic growth. Silicon Valley Bank began its slide into insolvency when it was forced to dump some of its Treasuries at at a loss to fund its customers' withdrawals. Under the Fed's new program, banks can post those securities as collateral and borrow from the emergency facility.
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