Saleha Mohsin, Lydia Beyoud, Sridhar Natarajan
(Bloomberg) – The U.S. regulator overseeing the emergency split of SVB Financial Group has sold assets and made some of its customers’ uninsured deposits available as early as Monday, according to people familiar with the matter. I’m in a hurry to do it.
The first payment, the amount of which is still to be determined, is expected to be more cash as the bank’s assets are sold, helping to weather many Silicon Valley entrepreneurs and their troubled customers. The amount is dependent in part on the Federal Deposit Insurance Corporation’s progress in cashing the assets by Sunday night.
Behind-the-scenes numbers are floating around that the initial payout could range from 30% to more than 50% of uninsured deposits, according to the people, who asked not to be identified about the private discussions.
An FDIC spokeswoman did not respond to a request for comment on the plan.
Silicon Valley Bank’s business clients are desperate for access to money to keep their businesses running and pay their employees. On Friday, the bank collapsed less than 48 hours after announcing its financing plans, making it the largest unsuccessful U.S. lender in more than a decade. The company expanded in recent years by absorbing deposits from tech start-ups, but began to lose money as customers ran out of cash and reduced their balances.
At the end of last year, Silicon Valley banks had over $175 billion in deposits and over $209 billion in total assets. This is because his SVB piled up bonds and government bonds that lost value as the Federal Reserve hiked interest rates.
The FDIC guarantees deposits of up to $250,000, but the vast majority of funds held in the SVB are well over that amount. The agency says it will make 100% of protected deposits available on Monday.
The FDIC said Friday that the amount of uninsured deposits is still being determined. Watchdog said it will issue advance dividends to uninsured depositors immediately, with future payments later. Wall Street executives expect there will be a market to sell the right to collect deposits.
Behind the scenes, senior Wall Street executives will quickly determine the value of the bank’s holdings and how much cash, absent some bailout or deal to sell all or part of the bank to a stronger institution. I was betting on whether I would be able to withdraw.
In these circles, a payout of less than half, such as 30%, is considered too little to avoid potentially severe repercussions for the tech sector and beyond.
Former FDIC Chairman William Isaac said in a telephone interview on Saturday that the partial advance could provide at least some relief.
“It won’t make the problem and pain go away, but it will make it easier for the bank’s customers to deal with losses,” said Isaac, who held the position from 1981 to 1985.
– with contributions from Katanga Johnson, Amelia Pollard, Jillian Tan, Sonali Basak and Ed Ludlow.
Other stories like this bloomberg.com
©2023 Bloomberg LP
https://www.eastbaytimes.com/2023/03/11/fdic-races-to-start-returning-some-uninsured-svb-deposits-monday/ FCID may make some available