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Biden reassures US banks sound; KFH exposure at $1.2 mn
NEW YORK, March 13, (Agencies): US President Joe Biden on Monday told US residents the nation’s financial systems are sound, following the swift and stunning collapse of two banks that prompted fears of a broader upheaval. “Your deposits will be there when you need them,” he said. U.S. regulators closed the Silicon Valley Bank on Friday after it experienced a traditional bank run, where depositors rushed to withdraw their funds all at once.
It is the second largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual. But the financial bloodletting was swift; New York-based Signature Bank also failed. The president, speaking from the White House shortly before a trip to the West Coast, said he’d seek to hold those responsible accountable, and pressed for better oversight and regulation of larger banks. And he promised no losses would be borne by taxpayers.
“We must get the full accounting of what happened,” he said. “Americans can have confidence that the banking system is safe.” Biden also said management of the banks should be fired. “If the bank is taken over by the FDIC, the people running the bank should not work there anymore,” he said, referring to the Federal Deposit Insurance Corp., the agency responsible for ensuring the stability of the banking system. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. Another beleaguered bank, First Republic Bank, announced Sunday that it had bolstered its financial health by gaining access to funding from the Fed and JPMorgan Chase. The developments left markets jittery as trading began Monday.
The Asian and European markets fell and while U.S. markets traded higher, shares in midsized commercial banks were hammered despite assurances from Biden. In Kuwait, eight Kuwaiti banks listed on the Kuwait Stock Exchange, Boursa Kuwait, confirmed Monday that they were not exposed to Silicon Valley Bank, which was closed by the US authorities due its bankruptcy last week. Warba, Boubyan, Kuwait International (KIB), Ahli United, Al Khaleej, Al-Tejari, Al-Ahli and Burgan banks clarified in separate disclosures to Boursa Kuwait’s website that there are no direct or indirect exposures to Silicon Valley Bank. However, the Central Bank of Kuwait (CBK) affirmed “as a result of its contacts with the Kuwaiti banks that their exposure will be quite marginal.”
The National Bank of Kuwait (NBK) said its exposure to Silicon Valley Bank following the closure of the bank by the US authorities is “minimal” and will not affect the bank’s financial position. The disclosure published on the Boursa website said NBK’s small exposure is represented in off-balance sheet items in the form of letters of guarantee worth USD 4.9 million (about 1.5 million Kuwaiti dinars). Meanwhile, CBK confirmed earlier that the exposure of Kuwaiti banks to the American Silicon Valley Bank is minimum due to the stability and solidity of the conditions of the banking system’s units in light of the large financial buffers that banks possess. In related news, Kuwait Finance House announced on Monday that the value of its exposure to the US bank, Silicon Valley Bank, that crashed last week, was in the range of KD 381.000 (USD 1.2 million).
The KFH said in a statement on Boursa Kuwait website that this exposure would entail no “fundamental financial effect on the group financial status.” Elsewhere, the Bank of England and U.K. Treasury said early Monday that they had facilitated the sale of a Silicon Valley Bank subsidiary in London to HSBC, Europe’s biggest bank, ensuring the security of 6.7 billion pounds ($8.1 billion) of deposits. In an effort to shore up confidence in the banking system, the Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients would be protected and able to access their money. “This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement. Under the plan, depositors at Silicon Valley Bank and Signature Bank, including those whose holdings exceed the $250,000 insurance limit, will be able to access their money on Monday. Britain also moved quickly, working throughout the weekend to arrange the sale of Silicon Valley Bank UK Ltd., the California bank’s British arm, for the nominal sum of one pound.