Crac Silicon Valley Bank, the Fed convenes an emergency meeting behind closed doors on Monday – Corriere.it

After the closure of the Silicon Valley Bank, which passed under the control of the Fdic, the federal agency that insures deposits, the American central bank takes the field. The Federal Reserve has scheduled an emergency closed-door meeting of the Board of Governors under expedited procedures for Monday, March 13 at 11:30 am, Washington time (in Italy it will be 5.30 pm). The meeting, held in the presence of the bank’s Board offices in Washington, can also be attended by audio and video conference, hence the choice of the late morning time (on the West Coast it will be 8.30 in the morning).

According to a statement released by the Fed Sunday morning, during the emergency meeting the board of governors called to examine and determine the advance and discount rates that the Federal Reserve Banks will have to apply. (In the United States the banks that are part of the Federal Reserve system are 12 and with their 24 branches they are the operational arms of the American Central Bank).

What does it mean? The advance rate the percentage of the value of the collateral, that is, the guarantee that a bank is willing to extend as a loan. The down payment rate, for example, helps a lender determine what type of collateral to present to secure the desired loan amount, helping to minimize the lender’s exposure to losses when accepting collateral that can fluctuate worth. The discount rate instead it refers to the interest rate charged to commercial banks and other financial institutions for short-term loans made by the Federal Reserve.

After the collapse of the Silicon Valley Bank, which shook the world’s stock markets on Friday by sending bank stocks down, the Fed may have decided to step in to prevent another storm in the markets. Some observers have gone so far as to speculate that the US central bank, at the monetary policy meeting scheduled for 21 and 22 March, it could revise its intention to tighten rates more aggressively, with a new possible increase of 50 basis points, as anticipated by the president of the Fed, Jerome Powell, in the last hearing before the Joint Economic Commission of the US Congress, to tame inflation which also remains too high in the United States. Core inflation, which excludes energy and food prices, was 5.6% in January, above market expectations of 5.5% and more than double the Fed’s 2% target.

The problem of uninsured deposits contributes to making investors nervous. In the United States, the FDIC insures deposits up to $250,000. But not all deposits are insured, as Silicon Valley Bank showed where only 93% of deposits were unsecured. Hence the run on the banks, to try to withdraw deposits equal to 42 billion dollars that brought down the bank of start-ups and which has already begun to infect regional banks in California. The reopening by the FDIC of the National Bank of Santa Clara, born from the ashes of the SVB and operational since Monday to facilitate withdrawals by customers for the insured amount, does not solve the problem of how to save the hi-tech ecosystem left without funds to pay workers wages and function.