US banks ask authorities to protect all deposits

The recent bankruptcies of Silicon Valley Bank and Signature Bank are causing a crisis of confidence in the banking sector. DADO RUVIC / REUTERS

A coalition of medium-sized American banks, fearing a flight of their customers due to the crisis of confidence affecting American banks, is asking the Fed to cover their deposits beyond the legal ceiling.

A coalition of medium-sized US banks has asked federal regulators to guarantee all their customers’ deposits for two years, even above the usual limit of $250,000, to avoid a contagion phenomenon after the bankruptcy of the SVB bank, according to Bloomberg.

This measure”immediately halt the exodus of customers from smaller banks, stabilize the banking sector and significantly reduce the risk of further bankruptciesthe Mid-Size Bank Coalition of America argued in a letter addressed to authorities, according to an article published by the news agency on Saturday. The recent bankruptcies of Silicon Valley Bank and Signature Bank are causing a crisis of confidence in the industry.

Many clients of similar banks withdrew their money and deposited it in larger banks, such as JPMorgan Chase or Bank of America, considered too big for the state to bail out in a crisis. Currently, deposits in the United States are protected by the banking regulator, the FDIC, up to $250,000.

Bank First Republic, which mainly serves wealthy clients, saw its stock valuation drop 80% this week. Headquartered in San Francisco, it is the 14th largest US bank by asset size. “Regardless of the general health of the banking sector, confidence has been eroded for all but the largest banks.the coalition said, according to Bloomberg. In particular, it calls on the FDIC, the Federal Reserve (Fed), and Economy Secretary Janet Yellen to “restore confidence“.

The group of banks proposes to finance this measure themselves by increasing the amount of contributions they already pay to the FDIC to guarantee deposits. On Thursday, eleven major US banks pledged to deposit a total of $30 billion into First Republic accounts. Bank of America, Citigroup, JPMorgan Chase and eight other institutions hope to show their “trust in the banking systemof the country, according to a joint press release.