American banks are asking authorities to protect all deposits A coalition of medium-sized American banks, fearing a loss of clients due to the crisis of confidence affecting American banks, is asking the Fed to cover their deposits beyond the legal limit.
A coalition of medium-sized American banks has asked federal regulators to guarantee all their customers’ deposits for two years, even above the usual limit of $250,000, to prevent a contagion effect after the bankruptcy of SVB Bank, according to Bloomberg.
This measure “would immediately stop the exodus of clients from smaller banks, stabilize the banking sector and greatly reduce the risks of other bankruptcies,” argued the Mid-Size Bank Coalition of America in a letter to the authorities, according to an article published Saturday by the news agency.
The recent bankruptcies of Silicon Valley Bank and Signature Bank are causing a crisis of confidence in the sector. Many clients of similar banks have withdrawn their money to deposit it in larger banks, such as JPMorgan Chase or Bank of America, considered too big to fail and therefore likely to be bailed out by the government in case of crisis. Currently, deposits in the United States are protected by the banking regulator, the FDIC, up to $250,000.
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This week, First Republic Bank, which primarily serves wealthy clients, saw its market value drop by 80%. Based in San Francisco, it is the 14th largest American bank by asset size. “Regardless of the general health of the banking industry, confidence has been eroded for all but the largest banks,” the coalition said, according to Bloomberg. It is calling on the FDIC, the Federal Reserve (Fed), and Treasury Secretary Janet Yellen to “restore confidence.”
The group of banks proposes to finance this measure themselves by increasing the amount of contributions they already pay to the FDIC to guarantee deposits. On Thursday, eleven large American banks committed to depositing a total of $30 billion into First Republic’s accounts. Bank of America, Citigroup, JPMorgan Chase, and eight other institutions hope to show their “confidence in the country’s banking system,” according to a joint statement.
