US President Joe Biden says his government’s swift actions to help depositors in two banks should give the public confidence the US banking system is safe.
Bank stocks around the world have plunged even as Mr Biden vowed to take whatever action was needed to ensure the safety of the country’s banking system after Silicon Valley Bank and Signature Bank collapsed.
Mr Biden’s attempt to reassure markets and depositors came after emergency measures by the US to guarantee deposits at tech-focused lender SVB failed to dispel investor worries about potential contagion to other banks worldwide.
In the US, First Republic Bank tumbled by as much as 76.6 per cent despite news it had secured fresh financing while Western Alliance Bancorp and PacWest Bancorp fell 82.5 per cent and 53 per cent respectively.
Trading in the stocks was halted several times due to volatility.
First Republic had been able to meet withdrawal demands on Monday (local time) with the help of extra funding from JP Morgan Chase, the mid-cap lender’s executive chair Jim Herbert told CNBC, adding that it was not seeing a massive deposit outflow.
Mr Biden said his administration’s rapid actions at the weekend should reassure the public that the US banking system was safe, and promised stiffer bank regulation after the country’s biggest bank failure since the 2008 financial crisis.
“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them,” he said.
The managers of the banks would be fired, Mr Biden noted, and investors would lose money.
“They knowingly took a risk, and when the risk didn’t pay off his adjusters lose their money. That’s how capitalism works,” he said.
Mr Biden also promised regulation after the biggest US bank failure since the 2008 financial crisis.
“I’m going to ask Congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure will happen again, and to protect American jobs as a small business,” he said.
Nevertheless, shares in big US banks, including JP Morgan Chase, Morgan Stanley and Bank of America also weakened, along with wider stock markets.
Emboldened by bets that the US Federal Reserve may have to slow its rate hikes, and with investors seeking safe havens, the price of gold raced towards the key $US1900 level.
