US futures, including S&P 500 Index (INDEXSP: .INX) futures, have jumped in response to a plan to save depositors of the failed Silicon Valley Bank (SVB)
Readers unfamiliar with the recent SVB collapse can check out today's article from the Motley Fool's Scott Phillips article here.
Basically, SVB is a United States-based bank with a niche working with tech companies and others of that nature. It also provided loans to start-ups. It reportedly worked with about half of US venture-backed tech and life science businesses.
SVB was one of the largest 20 banks in the US. Last week, the bank collapsed and US officials took over its operations. This reportedly represents the largest US bank failure since the GFC.
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Investor confidence returns
According to reporting by CNBC, futures – which give an indication of whether the share market is going to open up or down – have reacted positively to the news that all depositors of SVB are going to get their money back. S&P 500 futures are up 1.4%.
All the SVB depositors will get access to their funds on Monday, according to a joint statement from the Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporation (FDIC).
In order to provide confidence to the rest of the banking system, regulators are making additional funding available to other banks with a new bank term funding program. It will offer loans of up to one year to banks, savings, saving associations, credit unions and other associations, according to CNBC.
Regulators also stepped in to close Signature Bank – reportedly one of the main banks for the cryptocurrency industry. At 31 December 2022, it had US$110.4 billion in total assets and US$88.6 billion in total deposits.
Depositors of Signature Bank will get their money as well. But, it was noted by regulators that no losses would be borne by taxpayers.
In other words, shareholders and bondholders at both Signature Bank and SVB are being "wiped out", according to a Treasury official, CNBC said.
Early ASX share market reaction
The Commonwealth Bank of Australia (ASX: CBA) share price is up around 0.3%, while other ASX bank shares have dipped slightly in mid-morning trade.
At the time of writing the National Australia Bank Ltd (ASX: NAB) share price is down 0.17, the Westpac Banking Corp (ASX: WBC) share price has slipped 0.32% and the ANZ Group Holdings Ltd (ASX: ANZ) share price is 0.59% lower.
As a whole, the S&P/ASX 200 Index (ASX: XJO) is down around 0.6%.
It will be interesting to watch whether other small-to-mid US banks are facing similar issues. Various stakeholders will want to understand why SVB collapsed, and so rapidly.
