(San Francisco) A coalition of midsize U.S. banks has asked federal regulators to guarantee all customer deposits for two years, even above the usual $250,000 limit, to avoid contagion after the bankruptcy of SVB bank, according to Bloomberg.
The move would “immediately stop the exodus of customers from smaller banks, stabilize the banking industry, and greatly reduce the risk of further failures,” the Mid-Size Bank Coalition of America argued in a letter to authorities, according to an article. published on Saturday by the news agency.
The recent failures of Silicon Valley Bank and Signature Bank are causing a crisis of confidence in the sector.
Many customers 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 not to bail them out in a crisis.
Currently, in the United States, deposits are protected by the banking regulator, the FDIC, up to $250,000.
This week, the First Republic bank, which mainly serves wealthy clients, saw its stock market valuation drop by 80%. Based in San Francisco, it is the 14th largest U.S. bank by asset size.
“Regardless of the general health of the banking industry, confidence has been eroded for all but the largest banks,” the coalition said, according to Bloomberg.
In particular, she calls on the FDIC, the Federal Reserve (Fed) and Secretary of the Economy Janet Yellen to “restore confidence”.
The group of banks proposes to finance this measure themselves by increasing the amount of the assessments they already pay to the FDIC to guarantee deposits.
On Thursday, eleven major US banks pledged to deposit a total of $30 billion in First Republic accounts.
Bank of America, Citigroup, JPMorgan Chase and eight other institutions hope to show their “confidence in the banking system” of the country, according to a joint press release.
The coalition and the authorities could not be reached immediately.
