Tuesday, July 16, 2024

SVB, Signature Bank’s failure puts US Federal Reserve in tough spot. Here’s why

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The failure of two major US banks over the weekend made stock markets around the world nervous on Monday, as concerns grow over systemic risks at lenders in the world’s most powerful economy.

Two days after tech and startup-focused lender Silicon Valley Bank was shuttered by authorities, New York-based Signature Bank faced a similar fate. It became the third-biggest US banking casualty since the 2008 financial crisis.

US authorities, including the Federal Reserve, Treasury and Federal Deposit Insurance Corp, announced a host of emergency measures to boost confidence in the banking system following the sudden failure of the two banks.

Among the important measures taken was a new facility to give banks access to emergency funds. The Federal Reserve also made it easier for banks to borrow from it in emergencies.

Aggressive rate hikes

While the measures have provided relief to distressed Silicon Valley firms and global markets, analysts are still worried about systemic risks in small and mid-sized banks in the US, which do not have the same level of regulations as bigger banks.SVB, Signature Bank’s failure puts US Federal Reserve in tough spot. Here’s why


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