Fed bails out Silicon Valley Bank customers to avoid contagion effect

The Federal Reserve delivered a blow to the table on Sunday. Following the failure of US bank Silicon Valley Bank (SVB) last Friday, the Fed, the US Treasury, and the Deposit Insurance Corporation (FDIC) announced in a statement issued yesterday that they would make additional funds available to guarantee the payment of all SVB deposits, both insured and uninsured. The measure has been taken to avoid a crisis of confidence in the country's financial system.

It should be noted that the main difference between Silicon Valley Bank and other banks lies in the typology of its clients. Most of SVB's clients are venture capital companies, i.e., companies with a few years of life and a high growth potential; at the same time, it involves high levels of risk, since it is difficult for them to obtain the desired financing through traditional financing channels.

This Monday we woke up to the news that Europe's largest bank, HSBC, has bought the UK subsidiary of Silicon Valley Bank for the symbolic figure of one pound. The US bank intervened last Friday after it became known that it was $2.25 billion short of balancing its balance sheet.

Everything that has happened since Friday has caused general unease within the financial sector worldwide. Although the US authorities have done everything possible to restore confidence, there is no doubt that nervousness will persist in the short and medium term.