Systemic Risk: Banks are Closing and Anxiety is High

Rawpixel.com / shutterstock.com
Rawpixel.com / shutterstock.com

Last week, Silicon Valley Bank collapsed. And after the California-based bank closed, many other banks have worried that they’re next. Meanwhile, account holders have anxiety as they wait to find out what happens if and when their bank closes.

Emergency measures have been taken by the US government. Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen, and FDIC Chair Martin Gruenberg have already assured depositors will have access to their money for those who had accounts with Silicon Valley Bank.

But that’s not the only problem happening at the moment.

The FDIC took over and shut down a second bank – New York’s Signature Bank. The reason is due to “systemic risk.”

A press release from the Federal Reserve Board announced this:
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”

Essentially, there’s going to be fallout from the collapse of both banks – and The Fed is doing everything it can to offer peace of mind to Americans.

The question is, will this take care of the problem or is there a bigger financial crisis looming around the corner?

Right now, it seems that there is a depositor bailout – and that there is no handout going out to shareholders and debtholders. In fact, it’s been very clear that “Shareholders and certain unsecured debtholders will not be protected.”

Meanwhile, as banks show uncertainty, Bitcoin saw a jump. This could be as a result of people feeling anxious about the traditional banking system – and crypto suddenly offers a more appealing option.

There’s no telling what will happen next. You can always follow the FDIC to read all of the latest press releases as the US government knows more.