U.S. government says all SVB deposits are safe

The U.S. federal government has decided to fully guarantee deposits in a move to prevent risk contagion after the collapse of Silicon Valley Bank (SVB). This move was made as fears of bank runs began to spread, with small and medium-sized banks at the center of the concerns. The South Korean and Asian financial markets could avoid “Black Money,” as they opened shortly after the government’s announcement. Some predict that the crisis, which was triggered by the U.S. Federal Reserve’s (Fed) intense tightening, will likely bring the government’s rate-freeze pivot earlier than expected.

On Sunday, the U.S. Treasury Department and the Federal Deposit Insurance Corporation (FDIC) issued a joint statement saying, “After receiving a recommendation from the boards of the FDIC and the Federal Reserve and consulting with President Joe Biden, Treasury Secretary Janet Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all their money starting Monday, March 13.” The move came two days after SVB was shut down in a massive bank run on Friday.

The Fed also decided to introduce the Bank Term Funding Program (BTFP), a fund that provides emergency liquidity to banks. The idea is to nip a “crisis in the financial system” in the bud amid the highest interest rates in 40 years. On the same day, New York state regulators shut down Signature Bank, the main transaction bank for virtual currency companies with total assets of about 143 trillion won, as a measure to prevent financial turmoil.

The global financial markets did not see a Black Monday as feared. The benchmark KOSPI ended the day at 2,410.660, up 16.01 points from the previous day. The KOSPI fell nearly two percent on the day and closed up 0.29 points to 788.89. President Yoon Suk Yeol ordered his top aides to “closely check the impact of the SVB collapse on the domestic financial market and the real economy.”


Hyoun-Soo Kim kimhs@donga.com · Min-Woo Park minwoo@donga.com