what are savers at risk (in the USA and in Italy) - Corriere.it

what are savers at risk (in the USA and in Italy) - Corriere.it

1) How did the US intervene to reassure Silicon Valley Bank account holders?
The Federal Reserve, the US Treasury Department and the Federal Deposit Insurance Corporation (FDIC) have decided to guarantee all deposits, even those exceeding $250,000. Not only those of the Svb but also of the Signature Bank of New York. The goal is to prevent bank run, i.e. the flight of deposits from infecting other American banks.

2) What other actions has the Fed decided?
To restore confidence in the system, the Fed launched the Bank Term Funding Program which allows all banks and financial institutions to borrow money from the central bank to cover any requests from customers who want to withdraw their deposits without the banks have to resort to the sale of assets, which would undermine financial stability. Not a bailout, a rescue, the White House specified. The Fed has not placed a ceiling on the funding requests of the banks which they will have to offer in exchange for collateral, negotiable debt instruments. At the end of 2022, US banks had about 620 billion of potential losses on securities, according to the Fdic, the result of past expansionary monetary policy.

3) What effect will it have?
According to analysts, the Fed plan should stabilize the system. But meanwhile on Wall Street the banks, especially the smaller ones, have left a lot of value on the ground.

4) What triggered the rush to withdraw deposits from the Svb?
The innovative companies, clients of Svb, have a strong absorption of cash because they invest a lot and the rise in interest rates has made it more expensive to finance themselves. Hence the rush by startups to withdraw their deposits, together with the spread of fears about the bank's stability.

5) What is the difference between the USA and Europe?
The belief of the experts that something similar cannot happen in Europe because the banks observe the Basel 3 rules. In Italy the liquidity coverage ratio is 160% while the net stable funding ratio is 130%, well above the 100% required . In Europe, banks with over 10 billion in assets are subject to Basel 3 rules. In the USA, the ceiling has been raised to 250 billion. Svb had assets of around 200 billion lire.

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