The New York Post: How Silicon Valley Bank’s failure could spark a run on regional banks

by | Mar 11, 2023 | Stock Market

The failure of Silicon Valley Bank could spark a run on other regional and midsized banks across the country if wealthy individuals rush to pull their money out of accounts with values too high for FDIC coverage and flee to larger institutions amid fears that risk to all but the most sizable institutions could be systemic, sources reportedly told the New York Post. See: Silicon Valley Bank branches closed by regulator in biggest bank failure since Washington Mutual

“Small regional banks are done,” one unnamed banking source reportedly told the New York Post. “Everyone is going to want to put their money in JPMorgan 
or Bank of America
” If a buyer steps in this weekend to scoop up the assets of SVB Financial Group
which catered to startups in tech and other industries, a disaster would likely be averted. But potential buyers are skittish about taking over the collapsed bank without backing from the federal government. There’s simply too much uncertainty and risk associated with a deal unless the government steps in, people described as having knowledge of prospective buyers’ thinking reportedly told the New York Post. “My instinct is either someone buys the whole thing with concessions from [the] government or it goes to receivership,” one banker close to the negotiations reportedly told the Post. Silicon Valley Bank was shuttered on Friday by California regulators and placed into receivership with the Federal Deposit Insurance Corp. “No one wants to do the deal without a government backstop,” a private-equity insider echoed. “The government needs to prepackage a deal, like they did with Lehman.” Another banker pointed out the Lehman Brothers collapse in 2008 is still being tied up nearly 15 years after its failure. “No one wants to take on that kind of headache,” said the private-equity insider. One top investment bank sent a note to clients advising them on what could happen if no Silicon Valley Bank buyer steps in, according to a transcription reviewed by the New York Post. The note outlined how the FDIC is spending the weekend assessing the value of SVB’s assets. It will pay out up to $250,000 in insurance coverage for accounts at that level or below on Monday. The agency will also make a payment, called an advanced dividend, to uninsured depositors as quickly as possible. “The rest m …

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