The news: The US government is doing its best to cut fears of a looming banking crisis, including President Joe Biden saying that the public should “rest assured that our banking system is safe.”
The government also guaranteed all deposits at collapsed lenders Silicon Valley Bank and Signature Bank, which have been taken over by regulators.
What government action means for banking: In the last week, crypto-focused lenders Signature and Silvergate have both gone under. And SVB’s meltdown is the biggest US banking failure since the financial crisis.
That’s convinced the authorities that turmoil could spread and forced them into action. Government intervention sets a precedent for protecting depositors and having a hands-on approach to regulating small lenders in the future. And the government may have to step in again: Shares in regional banks including First Republic nosedived on Monday amid fears of a deepening crisis.
Lessons learned from banks’ collapse:
Analyst’s take: “Contagion will not spread as far and wide as speculated,” according to Insider Intelligence Principal Analyst Tiffani Montez.
“The FDIC’s swift action to protect taxpayers' deposits and the Federal Reserve’s new BTFP facility will reassure markets. Still, the markets are hyper-sensitive and could react in an outsized way to any bank or startup communications around performance or balance sheet management.”
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.