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US Bank Customers Reassured After Authorities Step in to Protect Deposits Amidst Market Fears

Customers of the two US banks that were seized by regulators last week have been reassured that their deposits are protected, despite concerns over systemic contagion in financial markets. The collapse of Silicon Valley Bank (SVB) and Signature Bank has led to fears among investors and entrepreneurs in the cryptocurrency sector, who have relied on the banks as on-ramps for fiat money to flow into digital assets. However, a few dozen account holders who waited outside a San Francisco branch of SVB said they were not panicking, and were reassured by the presence of the Federal Deposit Insurance Corporation (FDIC), which guarantees deposits in the event of a bank failure.

Picture: Kumaon Jagran

Wyatt Boumedine, CFO of a Silicon Valley start-up, said his company had experienced no difficulties making payroll, and was working to reassure employees that they would not lose out. "Yesterday the information coming from the Fed really relieved everybody in (Silicon) Valley... that we will have less issue accessing the funds," he said. Boumedine was also reassured by President Joe Biden's statement on Monday that the banking sector was secure and depositors' funds would be protected.

Edward Tricomi, a hair salon business owner who banks with Signature Bank, said he was staying with the bank and urged others not to panic. "The key thing, everybody should know this: don't panic, don't run on it, because everybody loses. So if everybody just keeps cool, you'll be alright," he said.

Governments in Europe and the US have sought to calm markets and prevent a repeat of the 2008 financial crisis, when the global banking system seized up. In a joint statement on Sunday, the Federal Reserve, FDIC, and Treasury Department said SVB depositors would have access to "all of their money." Nonetheless, bank stocks around the world have fallen, as investors worry that the troubles of a few banks could spread.

Analysts have noted that the collapse of SVB and Signature Bank is unlikely to cause systemic damage, as the banks had relatively little diversification and exposure to risky assets. However, the closures have highlighted the importance of on-ramps for the cryptocurrency sector, which is facing increasing pressure from regulators to cut off its access to banking services. The closure of Silvergate, another crypto-friendly bank, last week, has left the industry with few options for accessing fiat money.

The fallout from the bank closures has also raised questions about the health of the broader financial system, and whether authorities have done enough to prevent a crisis. Some experts have argued that the lack of diversification in the banking sector, coupled with a low-interest-rate environment and high levels of debt, could make the system vulnerable to shocks. However, others have pointed out that the banking system has undergone significant reforms since the 2008 crisis, and is now better equipped to handle problems.

As the dust settles on the SVB and Signature Bank collapses, investors will be watching closely to see how the banking sector responds. Some analysts have suggested that the closures could lead to a wave of consolidation in the banking sector, as smaller banks struggle to compete with larger, more diversified institutions. Others have argued that the crisis could be a wake-up call for regulators, who may need to rethink their approach to financial stability in a rapidly changing world.

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